===============================================================================
STOCK PURCHASE AGREEMENT
by and among
BERKSHIRE REALTY COMPANY, INC.
▇▇▇▇▇▇▇▇▇ REAL ESTATE FUND II, L.P.
and
▇▇▇▇▇▇▇▇▇ BERKSHIRE HOLDINGS, L.L.C.
dated as of
September 19, 1997
===============================================================================
TABLE OF CONTENTS
Page
ARTICLE 1
Definitions
Section 1.1 "Action"..................................................................... 1
Section 1.2 "ADA"........................................................................ 1
Section 1.3 "Advancing Party"............................................................ 1
Section 1.4 "Affiliate".................................................................. 1
Section 1.5 "Agreement".................................................................. 1
Section 1.6 "Amended Company By-laws".................................................... 1
Section 1.7 "Benefit Arrangements"....................................................... 1
Section 1.8 "Blue Sky Laws".............................................................. 1
Section 1.9 "Board of Directors"......................................................... 2
Section 1.10 "Business Day"............................................................... 2
Section 1.11 "Buyer"...................................................................... 2
Section 1.12 "Buyer Counsel".............................................................. 2
Section 1.13 "Capital Expenditure Budget and Schedule".................................... 2
Section 1.14 "CERCLA"..................................................................... 2
Section 1.15 "Certificate of Designation"................................................. 2
Section 1.16 "Claim"...................................................................... 2
Section 1.17 "Closing".................................................................... 2
Section 1.18 "Closing Date"............................................................... 2
Section 1.19 "Code"....................................................................... 2
Section 1.20 "Commitment"................................................................. 2
Section 1.21 "Company".................................................................... 2
Section 1.22 "Company Charter"............................................................ 2
Section 1.23 "Company Common Stock"....................................................... 2
Section 1.24 "Company Environmental Reports".............................................. 2
Section 1.25 "Company Leases"............................................................. 2
Section 1.26 "Company Plans".............................................................. 2
Section 1.27 "Company Preferred Stock".................................................... 2
Section 1.28 "Company Properties"......................................................... 2
Section 1.29 "Company Registration Statement"............................................. 2
Section 1.30 "Company Reports"............................................................ 3
Section 1.31 "Company Stock".............................................................. 3
Section 1.32 "Company Units".............................................................. 3
Section 1.33 "Controlled Group Liability"................................................. 3
Section 1.34 "Debt Instruments"........................................................... 3
Section 1.35 "Development Properties"..................................................... 3
Section 1.36 "Development Budget and Schedule"............................................ 3
Section 1.37 "Employee Benefit Plans"..................................................... 3
Section 1.38 "Employees".................................................................. 3
Section 1.39 "Environmental Claim"........................................................ 3
Section 1.40 "Environmental Laws"......................................................... 3
Section 1.41 "Environmental Permits"...................................................... 3
Section 1.42 "ERISA"...................................................................... 3
Section 1.43 "ERISA Affiliates"........................................................... 3
Section 1.44 "Exchange Act"............................................................... 3
Section 1.45 "Execution Closing".......................................................... 3
Section 1.46 "Executive Summaries of the Company Environmental Reports"................... 3
i
Page
Section 1.47 "GAAP"....................................................................... 3
Section 1.48 "General Partner"............................................................ 3
Section 1.49 "Government Authority"....................................................... 3
Section 1.50 "HQ Space"................................................................... 3
Section 1.51 "HSR Act".................................................................... 3
Section 1.52 "Indemnified Party".......................................................... 4
Section 1.53 "Initial Closing"............................................................ 4
Section 1.54 "Initial Purchase Price"..................................................... 4
Section 1.55 "Insurance Policies"......................................................... 4
Section 1.56 "IRS"........................................................................ 4
Section 1.57 "Knowledge".................................................................. 4
Section 1.58 "Liabilities"................................................................ 4
Section 1.59 "Liens"...................................................................... 4
Section 1.60 "Loss and Expenses".......................................................... 4
Section 1.61 "Material Adverse Effect".................................................... 4
Section 1.62 "NYSE"....................................................................... 4
Section 1.63 "Operating Partnership"...................................................... 4
Section 1.64 "Operating Partnership Units"................................................ 4
Section 1.65 "Partnership Affiliate"...................................................... 5
Section 1.66 "Partnership Agreement"...................................................... 5
Section 1.67 "Pension Plans".............................................................. 5
Section 1.68 "Per Share Purchase Price"................................................... 5
Section 1.69 "Permitted Liens"............................................................ 5
Section 1.70 "Person"..................................................................... 5
Section 1.71 "Project".................................................................... 5
Section 1.72 "Property Restrictions"...................................................... 5
Section 1.73 "Purchase Price"............................................................. 5
Section 1.74 "Purchased Shares"........................................................... 5
Section 1.75 "Registration Rights Agreement".............................................. 5
Section 1.76 "Regulatory Filings"......................................................... 5
Section 1.77 "REIT"....................................................................... 5
Section 1.78 "Release".................................................................... 5
Section 1.79 "Remaining Equity Commitment"................................................ 5
Section 1.80 "Rent Roll".................................................................. 6
Section 1.81 "SEC"........................................................................ 6
Section 1.82 "Securities Act"............................................................. 6
Section 1.83 "Securities Laws"............................................................ 6
Section 1.84 "Stock Purchase"............................................................. 6
Section 1.85 "Subsequent Funding Minimum"................................................. 6
Section 1.86 "Subsequent Purchase Price".................................................. 6
Section 1.87 "Subsequent Purchase"........................................................ 6
Section 1.88 "Subsidiaries"............................................................... 6
Section 1.89 "Tax"........................................................................ 6
Section 1.90 "Tax Return"................................................................. 6
Section 1.91 "Tenancy Leases"............................................................. 6
Section 1.92 "The Berkshire Group"........................................................ 6
Section 1.93 "Total Equity Commitment".................................................... 6
Section 1.94 "Warrants"................................................................... 7
Section 1.95 "Welfare Plans".............................................................. 7
ARTICLE 2
ii
Page
Purchase and Sale of Shares; Closing
Section 2.1 "Purchase and Sale."......................................................... 7
Section 2.2 "Consideration."............................................................. 7
Section 2.3 "Initial Closing."........................................................... 7
Section 2.4 "Subsequent Purchase and Sale.".............................................. 7
Section 2.5 "Additional Agreements and Closing Deliveries.".............................. 8
Section 2.6 "Time and Place of Closing."................................................. 8
Section 2.7 "Right to Assign."........................................................... 8
Section 2.8 "Advances to Buyer."......................................................... 8
ARTICLE 3
Representations and Warranties of the Company
Section 3.1 "Organization and Qualification, Subsidiaries.".............................. 8
Section 3.2 "Authority Relative to Agreements; Board Approval.".......................... 9
Section 3.3 "Capital Stock and Units."................................................... 10
Section 3.4 "No Conflicts; No Defaults, Required Filings and Consents.".................. 11
Section 3.5 "SEC and Other Documents, Financial Statements; Undisclosed Liabilities." ... 11
Section 3.6 "Litigation, Compliance With Law."........................................... 12
Section 3.7 "Absence of Certain Changes or Events."...................................... 12
Section 3.8 "Tax Matters; REIT and Partnership Status.".................................. 12
Section 3.9 "Compliance with Agreements."................................................ 13
Section 3.10 "Financial Records; Company Charter and By-laws; Corporate Records."......... 15
Section 3.11 "Properties."................................................................ 15
Section 3.12 "Environmental Matters."..................................................... 18
Section 3.13 "Employees and Employee Benefit Plans."...................................... 20
Section 3.14 "Labor Matters."............................................................. 22
Section 3.15 "Affiliate Transactions.".................................................... 22
Section 3.16 "Insurance."................................................................. 22
Section 3.17 "Delaware Takeover Law."..................................................... 22
Section 3.18 "Brokers or Finders."........................................................ 22
Section 3.19 "Disclosure of Facts."....................................................... 22
Section 3.20 "REOC Status."............................................................... 22
Section 3.21 "Knowledge Defined."......................................................... 23
Section 3.22 "Construction of Material Adverse Effect."................................... 23
ARTICLE 4
Representations and Warranties of Buyer
Section 4.1 "Organization.".............................................................. 24
Section 4.2 "Due Authorization."......................................................... 24
Section 4.3 "Conflicting Agreements and Other Matters.".................................. 24
Section 4.4 "Acquisition for Investment, Sophistication, Source of Funds."............... 24
Section 4.5 "Brokers or Finders."........................................................ 24
Section 4.6 "REIT Qualification Matters."................................................ 24
Section 4.7 "Investment Company Matters."................................................ 25
ARTICLE 5
iii
Page
Representations and Covenants Relating to Closings
Section 5.1 "Taking of Necessary Action."................................................ 25
Section 5.2 "Company Preferred Stock, Certificate of Designation; By-laws.".............. 25
Section 5.3 "Public Announcements; Confidentiality."..................................... 25
Section 5.4 "Conduct of the Business."................................................... 25
Section 5.5 "No Solicitation of Transactions."........................................... 26
Section 5.6 "Information and Access.".................................................... 26
Section 5.7 "Notification of Certain Matters."........................................... 26
ARTICLE 6
Certain Additional Covenants
Section 6.1 "Resale.".................................................................... 26
Section 6.2 "Use of Funds.".............................................................. 26
Section 6.3 "REIT Status."............................................................... 26
Section 6.4 "Payments.".................................................................. 27
Section 6.5 "Preemptive Rights."......................................................... 27
Section 6.6 "Board of Directors"......................................................... 29
Section 6.7 "Transactions with Affiliates.".............................................. 29
Section 6.8 "Company Stock Authorized, Issued and Outstanding............................ 29
ARTICLE 7
Conditions to Closings
Section 7.1 "Conditions of Purchase at Initial Closing."................................. 29
Section 7.2 "Conditions of Purchase at All Closings.".................................... 30
Section 7.3 "Conditions of Sale."........................................................ 31
ARTICLE 8
Survival; Indemnification
Section 8.1 "Survival.".................................................................. 32
Section 8.2 "Indemnification by Buyer or the Company."................................... 32
Section 8.3 "Third-Party Claims."........................................................ 33
ARTICLE 9
Termination
Section 9.1 "Termination."............................................................... 33
Section 9.2 "Procedure and Effect of Termination."....................................... 34
Section 9.3 "Expenses.".................................................................. 34
ARTICLE 10
Miscellaneous
iv
Page
Section 10.1 "Counterparts.".............................................................. 34
Section 10.2 "Governing Law."............................................................. 34
Section 10.3 "Entire Agreement.".......................................................... 34
Section 10.4 "Notices."................................................................... 34
Section 10.5 "Successors and Assigns.".................................................... 35
Section 10.6 "Headings.".................................................................. 36
Section 10.7 "Amendments and Waivers.".................................................... 36
Section 10.8 "Interpretation; Absence of Presumption.".................................... 36
Section 10.9 "Severability.".............................................................. 36
Section 10.10 "Further Assurances."........................................................ 36
Section 10.11 "Specific Performance."...................................................... 36
Section 10.12 "Schedules."................................................................. 36
v
SCHEDULES
Schedule 3.1(e) Jurisdictions Not Qualified To Do Business
Schedule 3.1(f) Subsidiaries
Schedule 3.3(a) Capital Stock
Schedule 3.3(b) Operating Partnership Unit Options, Warrants, Etc.
Schedule 3.3(d) Individual Ownership
Schedule 3.4(b) Company Plans
Schedule 3.4(d) Statutory; Regulatory Compliance
Schedule 3.4(e) Contract Compliance
Schedule 3.4(f) Company Filings; Consent
Schedule 3.5(a) Company Registration Statements and Company Reports
Schedule 3.5(b) Company Financials
Schedule 3.6(a) Pending Litigation
Schedule 3.6(b) Company Compliance
Schedule 3.7 Absence of Certain Changes or Events
Schedule 3.8(a) Tax Matters
Schedule 3.9(a) Company Defaults; Charter or By-Laws Compliance
Schedule 3.9(b) Company Filings; Fees
Schedule 3.9(c) Indebtedness; Joint Venture and Partnership Agreements
Schedule 3.9(d) Development, Construction, Management and Leasing Arrangements
Schedule 3.9(e) Other Material Agreements
Schedule 3.9(f) Conflict Policies & Agreements; Waivers
Schedule 3.10(a) Financial Records; Company Charter and By-Laws; Corporate Records
Schedule 3.10(b) Corporate Records
Schedule 3.10(c) Corporate Proceedings
Schedule 3.11(a) Property Addresses; Title Summary
Schedule 3.11(b) Permits; Licenses; Zoning
Schedule 3.11(c) Road Changes; Condemnation Proceedings
Schedule 3.11(e) ADA Status
Schedule 3.11(g) Letters of Intent or Similar Understandings
Schedule 3.11(h) Property Rights; Rights of First Refusal
Schedule 3.11(i) Non-Compliance and Capital Expenditure Budget and Schedule; Insurance
Schedule 3.11(j) Developed, Undeveloped, or Rehabilitated Land of Company Property
Schedule 3.11(k) Company Properties; HQ Space
Schedule 3.11(l) Tenancy Leases
Schedule 3.11(m) Permitted Liens
Schedule 3.12(a) Environmental Permits
Schedule 3.12(e) Environmental Concerns
Schedule 3.12(f) Environmental Reports
Schedule 3.13(a) Employment Agreements
Schedule 3.13(b) Employee Benefit Plans
Schedule 3.13(c) Company Plans Compliance
Schedule 3.13(g) COBRA Participants
Schedule 3.13(k) Vesting; Acceleration of Payments
Schedule 3.14 Collective Bargaining; Labor Union Agreements
Schedule 3.15 Affiliate Transactions
Schedule 3.20 Individuals for Knowledge Test
Schedule 6.4 Form of Detailed Statement
vi
EXHIBITS
Exhibit A Form of Certificate of Designation
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Amended Company Bylaws
Exhibit D Form of Amendment to the Operating Partnership Agreement
vii
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of September 19, 1997,
is made by and among Berkshire Realty Company, Inc., a Delaware corporation (the
"Company"), ▇▇▇▇▇▇▇▇▇ Real Estate Fund II, L.P., a Delaware limited partnership
(the "Advancing Party"), and ▇▇▇▇▇▇▇▇▇ Berkshire Holdings, L.L.C., a Delaware
limited liability company and an affiliate of the Advancing Party ("Buyer").
RECITALS:
WHEREAS, Buyer wishes to purchase from the Company, and the Company wishes to
sell to Buyer, an aggregate of 2,737,000 shares of a newly designated and
authorized series of convertible preferred stock of the Company, convertible
into shares of the Company's common stock, par value $0.01 per share
(respectively, the "Company Preferred Stock" and the "Company Common Stock", and
such stock of such series and class, and all other series of preferred stock of
the Company outstanding from time to time, collectively, the "Company Stock"),
having the terms set forth in the form of Certificate of Designation,
Preferences and Rights attached as Exhibit A (the "Certificate of Designation"),
which designates the Company Preferred Stock pursuant to the Company's Restated
Certificate of Incorporation dated November 1, 1990, as amended by the
Certificate of Amendment dated December 7, 1990 (as so amended to the date
hereof, the "Company Charter"), in each case at a price of $25.00 per share;
WHEREAS, Buyer and the Company are entering into this Agreement to provide
for such purchase and sale and to establish various rights and obligations in
connection therewith;
WHEREAS, in consideration for the rights to be granted to it, the Advancing
Party has agreed to advance to Buyer all funds for any and all purchases of
Company Preferred Stock pursuant hereto; and
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
ARTICLE 1
Definitions
As used in this Agreement, the following terms shall have the following
respective meanings:
Section 1.1 "Action" shall mean any actual or threatened action, suit,
arbitration, inquiry, proceeding or investigation by or before any Government
Authority.
Section 1.2 "ADA" shall have the meaning set forth in Section 3.11(e).
Section 1.3 "Advancing Party" shall have the meaning set forth in the first
paragraph hereof.
Section 1.4 "Affiliate" shall have the meaning ascribed thereto in Rule 12b-2
promulgated under the Exchange Act, and as in effect on the date hereof, and
including, with respect to Buyer, ▇▇▇▇▇▇▇▇▇ Real Estate Fund II, L.P., ▇▇▇▇▇▇▇▇▇
Real Estate Co-Investment Partnership II, L.P., and their Affiliates and
investors.
Section 1.5 "Agreement" shall have the meaning set forth in the first
paragraph hereof.
Section 1.6 "Amended Company By-laws" shall have the meaning set forth in
Section 7.1(c).
Section 1.7 "Benefit Arrangements" shall have the meaning set forth in
Section 3.13(h).
Section 1.8 "Blue Sky Laws" have the meaning set forth in Section 3.4(f).
Section 1.9 "Board of Directors" shall mean the board of directors of the
Company.
Section 1.10 "Business Day" shall mean any day other than a Saturday, a
Sunday or a bank holiday in New York, New York.
Section 1.11 "Buyer" shall have the meaning set forth in the first paragraph
hereof.
Section 1.12 "Buyer Counsel" shall mean the General Counsel of ▇▇▇▇▇▇▇▇▇
Partners, L.L.C., or such counsel to Buyer and the Advancing Party as such
General Counsel shall have determined shall render any opinion to the Company in
connection with this Agreement.
Section 1.13 "Capital Expenditure Budget and Schedule" shall have the meaning
set forth in Section 3.11(i).
Section 1.14 "CERCLA" shall have the meaning set forth in Section 3.12(e).
Section 1.15 "Certificate of Designation" shall have the meaning set forth in
the second paragraph hereof.
Section 1.16 "Claim" shall have the meaning set forth in Section 3.12(g)(i).
Section 1.17 "Closing" shall mean the Execution Closing or the consummation
of the Subsequent Stock Purchase.
Section 1.18 "Closing Date" shall mean, with respect to the consummation of
any Stock Purchase, three (3) Business Days after the date on which the
conditions set forth herein with respect thereto shall be satisfied or duly
waived, or if the Company and Buyer mutually agree on a different date, the date
upon which they have mutually agreed.
Section 1.19 "Code" shall mean the Internal Revenue Code of 1986, as amended,
and any successor thereto, including all of the rules and regulations
promulgated thereunder.
Section 1.20 "Commitment" shall have the meaning set forth in Section 3.7.
Section 1.21 "Company" shall have the meaning set forth in the first
paragraph hereof.
Section 1.22 "Company Charter" shall have the meaning set forth in the second
paragraph hereof.
Section 1.23 "Company Common Stock" shall have the meaning set forth in the
second paragraph hereof.
Section 1.24 "Company Environmental Reports" shall have the meaning set forth
in Section 3.12(f).
Section 1.25 "Company Leases" shall have the meaning set forth in Section
3.11(f).
Section 1.26 "Company Plans" shall have the meaning set forth in Section
3.13(b).
Section 1.27 "Company Preferred Stock" shall have the meaning set forth in
the second paragraph hereof.
Section 1.28 "Company Properties" shall have the meaning set forth in Section
3.11(a).
Section 1.29 "Company Registration Statement" shall have the meaning set
forth in Section 3.5(a).
2
Section 1.30 "Company Reports" shall have the meaning set forth in Section
3.5(a).
Section 1.31 "Company Stock" shall have the meaning set forth in the second
paragraph hereof.
Section 1.32 "Company Units" shall have the meaning set forth in Section
3.3(b).
Section 1.33 "Controlled Group Liability" shall have the meaning set forth in
Section 3.13(h).
Section 1.34 "Debt Instruments" shall mean all notes, mortgages, deeds of
trust or similar instruments which evidence or secure any indebtedness owing to
the Company or any Subsidiary.
Section 1.35 "Development Properties" shall have the meaning set forth in
Section 3.11(j).
Section 1.36 "Development Budget and Schedule" shall have the meaning set
forth in Section 3.11(j).
Section 1.37 "Employee Benefit Plans" shall have the meaning set forth in
Section 3.13(h).
Section 1.38 "Employees" shall have the meaning set forth in Section 3.13(h).
Section 1.39 "Environmental Claim" shall have the meaning set forth in
Section 3.12(g)(ii).
Section 1.40 "Environmental Laws" shall have the meaning set forth in Section
3.12(g)(iii).
Section 1.41 "Environmental Permits" shall have the meaning set forth in
Section 3.12(a).
Section 1.42 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor thereto.
Section 1.43 "ERISA Affiliates" shall mean, with respect to any entity, trade
or business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1)
of ERISA that includes the first entity, trade or business, or that is a member
of the same "controlled group" as the first entity, trade or business pursuant
to Section 4001(a)(14) of ERISA.
Section 1.44 "Exchange Act" shall have the meaning set forth in Section
3.4(f).
Section 1.45 "Execution Closing" shall mean the date of execution and
delivery of this Agreement.
Section 1.46 "Executive Summaries of the Company Environmental Reports" shall
have the meaning set forth in Section 3.12(f).
Section 1.47 "GAAP" shall have the meaning set forth in Section 3.5(b).
Section 1.48 "General Partner" shall mean Berkshire Apartments, Inc., a
Delaware corporation, a wholly-owned subsidiary of the Company and the general
partner of the Operating Partnership, or any successor thereto or any successor
general partner of the Operating Partnership.
Section 1.49 "Government Authority" shall mean any government or state (or
any subdivision thereof) of or in the United States, or any agency, authority,
bureau, commission, department or similar body or instrumentality thereof, or
any governmental court or tribunal.
Section 1.50 "HQ Space" shall have the meaning set forth in Section 3.11(a).
Section 1.51 "HSR Act" shall have the meaning set forth in Section 3.4(f).
3
Section 1.52 "Indemnified Party" shall mean Buyer or the Company, as the
context may require.
Section 1.53 "Initial Closing" shall mean that date on which the first Stock
Purchase occurs.
Section 1.54 "Initial Purchase Price" shall mean the Purchase Price to be
paid at the Initial Closing, and shall be either an amount not in excess of
$15,000,000 or an amount not less than the Total Equity Commitment.
Section 1.55 "Insurance Policies" shall have the meaning set forth in Section
3.16.
Section 1.56 "IRS" shall mean the Internal Revenue Service.
Section 1.57 "Knowledge" shall have the meaning set forth in Section 3.20.
Section 1.58 "Liabilities" shall mean, as to any person, all debts, adverse
claims, liabilities and obligations, direct, indirect, absolute or contingent of
such person, whether accrued, vested or otherwise, whether in contract, tort,
strict liability or otherwise and whether or not actually reflected or required
by GAAP to be reflected and any off-balance sheet actual or contingent claims
which exceed in the aggregate $2,000,000 in such person's or entity's balance
sheets or other books and records, including (i) obligations arising from
non-compliance with any law, rule or regulation of any Government Authority or
imposed by any court or any arbitrator of any kind, (ii) all indebtedness or
liability of such person for borrowed money, or for the purchase price of
property or services (including trade obligations), (iii) all obligations of
such person as lessee under leases, capital or other, (iv) liabilities of such
person in respect of plans covered by Title IV of ERISA, or otherwise arising in
respect of plans for employees or former employees or their respective families
or beneficiaries, (v) reimbursement obligations of such person in respect of
letters of credit, (vi) all obligations of such person arising under acceptance
facilities, (vii) all liabilities of other persons or entities, directly or
indirectly, guaranteed, endorsed (other than for collection or deposit in the
ordinary course of business) or discounted with recourse by such person or with
respect to which the person in question is otherwise directly or indirectly
liable, (viii) all obligations secured by any Lien on property of such person,
whether or not the obligations have been assumed, and (ix) all other items which
have been, or in accordance with GAAP would be, included in determining total
liabilities on the liability side of the balance sheet, and in all events
excluding litigation matters involving tenants that arise and are dealt with in
the ordinary course of business and operating equipment leases.
Section 1.59 "Liens" shall mean all liens, mortgages, deeds of trust, deeds
to secure debt, security interests, pledges, claims, charges, easements and
other encumbrances of any nature whatsoever.
Section 1.60 "Loss and Expenses" shall have the meaning set forth in Section
8.2(a).
Section 1.61 "Material Adverse Effect" shall mean a material adverse effect,
or more than one effect if more than one shall be in existence at the same time
or times, on the financial condition, results of operations or business of the
Company and its Subsidiaries (to the extent of the Company's interests therein)
taken as a whole. For the purposes hereof, an effect shall be material (a) if
the aggregate dollar amount of any loss or Liability of, or, diminution in value
or other cost or expense to the Company, is in excess of $2,000,000, or (b) if
the aggregate dollar amount of revenue lost, not received, or reduced, or any
charge to earnings, is in excess of $200,000, or in the event that the
thresholds established in both clause (a) and (b) are met, then both.
Section 1.62 "NYSE" shall mean The New York Stock Exchange, Inc.
Section 1.63 "Operating Partnership" shall mean BRI OP Limited Partnership, a
Delaware limited partnership, or any successor thereto.
Section 1.64 "Operating Partnership Units" shall mean the class of
partnership units representing shares of partnership interests in the Operating
Partnership.
4
Section 1.65 "Partnership Affiliate" shall have the meaning set forth in
Section 3.9(f).
Section 1.66 "Partnership Agreement" shall mean that certain Amended and
Restated Agreement of Limited Partnership of BRI OP Limited Partnership dated as
of May 1, 1995.
Section 1.67 "Pension Plans" shall have the meaning set forth in Section
3.13(h).
Section 1.68 "Per Share Purchase Price" shall mean the price of $25.00 per
share for the Company Preferred Stock.
Section 1.69 "Permitted Liens" shall mean (i) Liens (other than liens imposed
under ERISA or any Environmental Law or in connection with any Environmental
Claim) for taxes or other assessments or charges of Governmental Authorities
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings, in each case, with respect to which adequate reserves
or other appropriate provisions are being maintained by the Company or its
Subsidiaries to the extent required by GAAP, (ii) statutory liens of landlords,
carriers, warehousemen, mechanics, materialmen and other Liens (other than Liens
imposed under ERISA or any Environmental Law or in connection with any
Environmental Claim) imposed by law and created in the ordinary course of
business for amounts not yet overdue or which are being contested in good faith
by appropriate proceedings, in each case, with respect to which adequate
reserves or other appropriate provisions are being maintained by the Company or
its Subsidiaries to the extent required by GAAP and which do not exceed $100,000
in the aggregate, (iii) the Company Leases, (iv) easements, rights-of-way,
covenants and restrictions which are customary and typical for office properties
similar to the Company Properties and which do not (x) interfere materially with
the ordinary conduct of any Company Property or the business of the Company and
its Subsidiaries as a whole or (y) detract materially from the value or
usefulness of the Company Property to which they apply, (v) the Liens which were
granted by the Company or any of its Subsidiaries to lenders pursuant to credit
agreements in existence on the date hereof which are described in Schedule
3.9(c), (vi) the other Liens, if any, described in Schedule 3.11(m), and (vii)
such imperfections of title and encumbrances.
Section 1.70 "Person" shall mean any individual, partnership, corporation,
limited liability company, business trust, joint stock company, unincorporated
association, joint venture, other entity of whatever nature or Government
Authority.
Section 1.71 "Project" shall have the meaning set forth in Section 3.11(j).
Section 1.72 "Property Restrictions" shall have the meaning set forth in
Section 3.11(a).
Section 1.73 "Purchase Price" shall mean the Per Share Purchase Price
multiplied by the number of shares of Company Preferred Stock to be purchased
and sold at a particular Closing.
Section 1.74 "Purchased Shares" shall have the meaning set forth in Section
2.1.
Section 1.75 "Registration Rights Agreement" shall have the meaning set forth
in Section 2.5(a).
Section 1.76 "Regulatory Filings" shall have the meaning set forth in Section
3.4(f).
Section 1.77 "REIT" shall have the meaning set forth in Section 3.8(b).
Section 1.78 "Release" shall have the meaning set forth in Section
3.12(g)(v).
Section 1.79 "Remaining Equity Commitment" shall mean, on any given date
after the Initial Closing, the Total Equity Commitment minus the Initial
Purchase Price. The Remaining Equity Commitment shall be deemed to be zero on
the earlier of (i) the date that the Remaining Equity Commitment actually equals
zero or (ii) the later of (A) September 19, 1998 or (B) if Buyer notifies the
Company by March 19, 1999 that it is, pursuant
5
to Section 2.4(b), exercising its right to make the Subsequent Purchase equal to
the then amount of the Remaining Equity Commitment, then, the date as soon
thereafter as (x) Buyer shall be permitted to effect such purchase under Article
V of the Amended Company Charter, (y) all conditions to Buyer's obligations to
effect such purchase shall have been satisfied or waived, and (z) such purchase
shall have been effected.
Section 1.80 "Rent Roll" shall have the meaning set forth in Section 3.11(f).
Section 1.81 "SEC" shall have the meaning set forth in Section 3.5(a).
Section 1.82 "Securities Act" shall have the meaning set forth in Section
3.4(f).
Section 1.83 "Securities Laws" shall have the meaning set forth in Section
3.5(a).
Section 1.84 "Stock Purchase" shall have the meaning set forth in Section
2.1.
Section 1.85 "Subsequent Funding Minimum" shall mean the amount of the Total
Equity Commitment minus the Initial Purchase Price.
Section 1.86 "Subsequent Purchase Price" shall have the meaning set forth in
Section 2.4(a), and shall be the amount of the Total Equity Commitment minus the
Initial Purchase Price.
Section 1.87 "Subsequent Purchase" shall have the meaning set forth in
Section 2.4(a).
Section 1.88 "Subsidiaries" shall mean, collectively, the General Partner and
the Operating Partnership, and any other Person in which the Company owns a
direct or indirect equity interest and of which the Company is the direct or
indirect general partner or managing members or as to which the Company has the
right to elect a majority of the board of directors or other governing body, or
otherwise direct the management of its business and affairs.
Section 1.89 "Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not. The term "Tax" also
includes any amounts payable pursuant to any tax sharing agreement to which any
relevant entity is liable as a successor or pursuant to contract.
Section 1.90 "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
Section 1.91 "Tenancy Leases" shall have the meaning set forth in Section
3.11(l).
Section 1.92 "The Berkshire Group" shall mean that group of Persons who with
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ and their Affiliates own substantial equity interests
or with respect to which they act as general partner or manager or otherwise
exert a substantial influence over management, and includes without limitation,
the past and present Affiliates of Berkshire Realty Company, Inc., the BRI OP
Limited Partnership, Berkshire Apartments, Inc., ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, or
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, or any Person with whom any of them was affiliated or employed,
or any predecessor of any such Persons.
Section 1.93 "Total Equity Commitment" shall mean the amount of $68,425,000.
6
Section 1.94 "Warrants" shall mean the not more than 2,664,629 outstanding
warrants issued by the Company in connection with its September 6, 1994
effective settlement of a class action litigation.
Section 1.95 "Welfare Plans" shall have the meaning set forth in Section
3.13(h).
ARTICLE 2
Purchase and Sale of Shares; Closing
Section 2.1 "Purchase and Sale." Subject to the terms and conditions hereof,
from time to time after the date hereof, at one or more Closings, the Company
will sell, convey, assign, transfer, and deliver, and Buyer will purchase and
acquire from the Company, an aggregate of 2,737,000 shares of Company Preferred
Stock (the "Purchased Shares"). Each Closing at which Buyer purchases any
Purchased Shares is herein referred to as a "Stock Purchase."
Section 2.2 "Consideration." Subject to the terms and conditions hereof, at
each Closing, Buyer shall deliver to the Company the relevant Purchase Price
with respect to the number of shares of Company Preferred Stock to be purchased
and sold at such Closing by wire transfer of immediately available funds in U.S.
dollars to the account or accounts specified by the Company.
Section 2.3 "Initial Closing." Subject to the terms and conditions hereof, at
a mutually agreeable time promptly following the date on which the conditions
set forth herein shall have been satisfied or duly waived, the Company will
sell, convey, assign, transfer and deliver, and Buyer will purchase and acquire
(and the Advancing Party shall advance to Buyer sufficient funds for such
purchase) from the Company, either (a) not more than 600,000 shares of Company
Preferred Stock or (b) 2,737,000 shares of Company Preferred Stock, as the
Company and Buyer shall indicate on the signature page hereto, and Buyer will
pay to the Company the Initial Purchase Price for such shares of Company
Preferred Stock.
Section 2.4 "Subsequent Purchase and Sale." (a) On notice as set forth in
this Section 2.4 (which notice, in the event of a Subsequent Purchase to be
accomplished in September, 1998, must be provided as set forth below in August,
1998), during the 12-month period immediately following the Initial Closing, but
on not more than one occasion, the Company shall have the right to require Buyer
to purchase (and the Advancing Party to advance to Buyer sufficient funds for
such purchase) from the Company additional shares of Company Preferred Stock
(the "Subsequent Purchase"), the number of shares of which shall be determined
by the Company; provided, however, that the Subsequent Purchase shall be made at
the Per Share Purchase Price and shall consist of a sufficient number of shares
of Company Preferred Stock so that the aggregate purchase price of the
Subsequent Purchase (each a "Subsequent Purchase Price") is not less than the
Subsequent Funding Minimum, and provided further that the Subsequent Purchase
Price to be paid at the Closing is not greater than the Remaining Equity
Commitment immediately prior to such Closing. In no event shall Buyer be
required to purchase shares of Company Preferred Stock pursuant hereto so that
it shall have expended more than the Total Equity Commitment. Subject to the
terms and conditions hereof, the Closing of the Subsequent Purchase shall be on
the first Business Day following the 15th day of the month following any month
in which the Company provides Buyer with written notice of its desire to effect
the Closing in the following month, if such written notice is given to Buyer at
least five Business Days prior to the end of such preceding month.
(b) If the Remaining Equity Commitment on September 19, 1998 is greater than
zero, then Buyer shall have the right to make a single Subsequent Purchase from
the Company of a sufficient number of shares of Company Preferred Stock at the
Per Share Purchase Price so that the Remaining Equity Commitment equals zero by
March 19, 1999, or as soon thereafter as all conditions to Buyer's obligation to
effect any purchase of Company Preferred Stock hereunder shall have been
satisfied or waived.
7
Section 2.5 "Additional Agreements and Closing Deliveries." (a) At the
Initial Closing, and as a condition to the parties' obligations hereunder to
effect the transactions contemplated hereby at the Closing, the Company and
Buyer shall enter into a registration rights agreement that is satisfactory in
form and substance to the Buyer (the "Registration Rights Agreement").
(b) In addition to the other things required to be done hereby, at each
Closing, the Company shall deliver, or cause to be delivered, to Buyer the
following: (i) certificates representing the number of shares of Company
Preferred Stock to be issued and delivered at such Closing, free and clear of
all liens (unless created by Buyer or any of its Affiliates), with all necessary
stock transfer and other documentary stamps attached, (ii) a certificate, dated
the relevant Closing Date and validly executed on behalf of the Company, as
contemplated by Section 7.1(a), as to the Initial Closing only, and by Section
7.2(a), as to all Closing, (iii) evidence or copies of any consents, approvals,
orders, qualifications or waivers required pursuant to Section 7.1, as to the
Initial Closing only, and to Section 7.2, as to all Closings, (iv) all
certificates and other instruments and documents required by this Agreement to
be delivered by the Company to Buyer at or prior to each Closing, and (v) such
other instruments reasonably requested by Buyer, as may be necessary or
appropriate to confirm or carry out the provisions of this Agreement.
(c) In addition to the delivery of the Purchase Price and the other things
required to be done hereby, at each Closing, Buyer shall deliver, or cause to be
delivered, to the Company the following: (i) a certificate, dated the relevant
Closing Date and validly executed by Buyer, to the effect that the "Conditions
to Sale" as contemplated by Section 7.3(a) shall have been satisfied, (ii) if
not previously delivered to the Company, all other certificates, documents,
instruments and writings required pursuant hereto to be delivered by or on
behalf of Buyer at or before each Closing, and (iii) such other instruments
reasonably requested by the Company, as may be necessary or appropriate to
confirm or carry out the provisions of this Agreement.
Section 2.6 "Time and Place of Closing." Each Closing shall take place on the
relevant Closing Date at such place and time as the Company and Buyer shall
mutually agree.
Section 2.7 "Right to Assign." Buyer may assign its rights and delegate its
obligations created hereby to purchase Company Preferred Stock in accordance
with the provisions of Section 10.5.
Section 2.8 "Advances to Buyer." At the Initial Closing and at the subsequent
Closing, the Advancing Party shall have available and shall advance to Buyer all
of the funds necessary to satisfy Buyer's obligations hereunder and to pay any
related fees and expenses in connection with the foregoing. The Advancing Party
has, and at each Closing will have, written, enforceable subscriptions from its
investors sufficient to advance the necessary funds to Buyer as will enable
Buyer to purchase the requisite Purchased Shares at each Closing, in accordance
with this Agreement.
ARTICLE 3
Representations and Warranties of the Company
The Company hereby represents and warrants to Buyer as follows:
Section 3.1 "Organization and Qualification, Subsidiaries." (a) The Company
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware. The Company has all requisite corporate power
and authority to own, operate, lease and encumber its properties and carry on
its business as now conducted, and to enter into this Agreement and the
Registration Rights Agreement, and to perform its obligations hereunder and
thereunder.
(b) The General Partner is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware. The General
Partner has all requisite corporate power and authority to own,
8
operate, lease and encumber its properties and carry on its business, and to
cause the Operating Partnership to carry on its business, as now conducted.
(c) The Operating Partnership is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Delaware.
The Operating Partnership has all requisite partnership power and authority to
own, operate, lease and encumber its properties and carry on its business as now
conducted.
(d) Each of the Subsidiaries of the Company is a corporation or partnership
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, and has the corporate or
partnership power and authority to own its properties and carry on its business
as it is now being conducted.
(e) Each of the Company and its Subsidiaries is duly qualified to do business
and in good standing in each jurisdiction in which the ownership of its property
or the conduct of its business requires such qualification, except as set forth
in Schedule 3.1(e).
(f) Schedule 3.1(f) sets forth the name of each Subsidiary of the Company or
the Operating Partnership (whether owned directly or indirectly through one or
more intermediaries). All of the outstanding shares of capital stock of, or
other equity interest in, each of the Subsidiaries owned by the Company or the
Operating Partnership are duly authorized, validly issued, fully paid and
nonassessable, and are owned, directly or indirectly, by the Company or the
Operating Partnership free and clear of all Liens, except as set forth in
Schedule 3.1(f). The following information for each Subsidiary is set forth in
Schedule 3.1(f), if applicable: (i) its name and jurisdiction of incorporation
or organization, (ii) the type of and percentage interest held by the Company or
Operating Partnership in the Subsidiary and, in the case of Subsidiaries, the
names of and percentage interest held by the other interest holders, if any, in
the Subsidiary, and the partnership agreement or other organizational documents
of the Subsidiary, and (iii) any loans from the Company or the Operating
Partnership to, or priority payments due to the Company or the Operating
Partnership from, the Subsidiary, and the rate of return thereon. Except as set
forth in Schedule 3.1(f), there are no existing options, warrants, calls,
subscriptions, convertible securities or other rights, agreements or commitments
which obligate the Company or any of the Subsidiaries to issue, transfer or sell
any shares of capital stock or equity interests in any of the Subsidiaries.
Section 3.2 "Authority Relative to Agreements; Board Approval." (a) The
execution, delivery and performance of this Agreement, the Registration Rights
Agreement, and the Certificate of Designation, the issuance of shares of Company
Preferred Stock in accordance herewith and the Certificate of Designation, and
the issuance and delivery of shares of Company Common Stock upon conversion of
shares of Company Preferred Stock in accordance with the provisions of the
Certificate of Designation, have been duly and validly authorized by all
necessary corporate action on the part of the Company and all necessary
partnership action on the part of the Operating Partnership. This Agreement has
been duly executed and delivered by the Company for itself and constitutes the
valid and legally binding obligations of the Company, enforceable against the
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights or
general principles of equity. Upon the issuance of shares of Company Preferred
Stock, the Certificate of Designation will constitute a valid and legally
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights or general principles of
equity.
(b) The Board of Directors of the Company has, as of the date hereof,
approved this Agreement, the Registration Rights Agreement, the Amended Company
By-laws and the transactions contemplated hereby and thereby. Not by way of
limitation of the foregoing, the Board of Directors has, as of the date hereof,
determined that the provisions of Article V, including the first paragraph
thereof and the paragraphs lettered A, B, C and E of the Company Charter, do not
apply to the Company Stock held or to be held by Buyer or the Advancing Party,
and the Company has declined, now and for all times in the future, any offer
deemed to have been made by Buyer or the Advancing Party pursuant to said
paragraph B, and agreed that Buyer and the Advancing Party will for no purpose
be deemed to be a "Group Acting in Concert," or portion thereof, or "Interested
Shareholder," in each case
9
as set forth in the Company Charter; provided, however, that no assignee of
Buyer hereunder or purchaser from Buyer of shares of Company Stock shall be
entitled, as to itself, to the benefits of such Board of Directors' action
without a subsequent action specifically referencing such assignee or purchaser
of Company Stock.
(c) The shares of Company Preferred Stock to be acquired pursuant to this
Agreement have been duly authorized for issuance, and upon issuance will be duly
and validly issued, fully paid and nonassessable, and will be shares of "Voting
Stock" (as defined in the Company Charter) and do not and will not constitute
Excess Shares (as defined in the Company Charter). The shares of Company Common
Stock issuable upon conversion of the Company Preferred Stock to be acquired
pursuant to this Agreement will, upon issuance upon such conversion, be duly and
validly issued, fully paid and nonassessable, and will be shares of "Voting
Stock" (as defined in the Company Charter) and do not and will not constitute
"Excess Shares" (as defined in the Company Charter).
(d) The Board of Directors of the Company has authorized the creation and
issuance of the Company Preferred Stock. As of the Initial Closing, the
Certificate of Designation will have been duly authorized, and filed with the
Office of the Secretary of State of the State of Delaware such that no further
actions are required for the due and valid issuance of Company Preferred Stock
in accordance herewith and therewith.
Section 3.3 "Capital Stock and Units." (a) The authorized capital stock of
the Company on the date hereof consists of 140,000,000 shares of Company Common
Stock, and 60,000,000 shares of Company Preferred Stock, par value $0.01 per
share. As of August 31, 1997, there were 25,813,752 shares of Company Common
Stock issued and outstanding, and no shares of such Company Preferred Stock
issued and outstanding, and as of the date hereof, there is no change except for
an immaterial change in the number of Company Stock outstanding. All such issued
and outstanding shares of Company Common Stock are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights. The Company has
no outstanding bonds, debentures, notes or other obligations the holders of
which have the right to vote (or which are convertible into or exercisable for
securities the holders of which have the right to vote) with the stockholders of
the Company on any matter. Other than (i) Operating Partnership Units which may
be redeemed by the holders thereof for Company Common Stock or the cash
equivalent thereof (at the option of the General Partner), or (ii) as set forth
in Schedule 3.3(a) to this Agreement, there are no existing options, warrants,
calls, subscriptions, convertible securities, or other rights, agreements or
commitments which obligate the Company to issue, transfer or sell any shares of
capital stock or other equity interests of the Company.
(b) As of August 31, 1997, 31,905,298 Operating Partnership Units of the
Operating Partnership were validly issued and outstanding, fully paid and
nonassessable, of which 25,501,147 Operating Partnership Units are owned by the
Company and 312,605 Operating Partnership Units are owned by the General Partner
(collectively, the "Company Units"). There are no other classes of units, or any
other form of general or limited partnership interest, of the Operating
Partnership issued or outstanding as of the date hereof. Except as set forth in
Schedule 3.3(b), the Operating Partnership has not issued or granted securities
convertible into interests in the Operating Partnership, and is not a party to
any outstanding commitments of any kind relating to, or any presently effective
agreements or understandings with respect to, interests in Operating
Partnership, whether issued or unissued. Since August 31, 1997, there have been
no changes to the number of Operating Partnership Units outstanding. On
September 22, 1997, the Operating Partnership anticipates it will issue 95,620
Operating Partnership Units in connection with a previously approved acquisition
transaction.
(c) Except for interests in the General Partner, the Subsidiaries of the
Company, the Operating Partnership, and its joint venture interest in the Spring
Valley Joint Venture, none of the Company or any of its Subsidiaries owns
directly or indirectly any interest or investment (whether equity or debt) in
any corporation, partnership, joint venture, business, trust or entity (other
than investments in short-term investment securities).
(d) The direct or indirect, beneficial or record, ownership of ▇▇▇▇▇▇▇ ▇▇▇▇▇
and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, respectively, in Company Common Stock or Operating
Partnership Units is as set forth in Schedule 3.3(d).
10
Section 3.4 "No Conflicts; No Defaults, Required Filings and Consents."
Except as contemplated hereby, neither the execution and delivery by the Company
hereof nor the consummation by the Company of the transactions contemplated
hereby in accordance with the terms hereof, will:
(a) conflict with or result in a breach of any provisions of the Company
Charter or By-laws of the Company;
(b) except as set forth in Schedule 3.4(b), result in a breach or violation
of, a default under, or the triggering of any payment or other obligations
pursuant to, or accelerate vesting under, any of the Company stock option plans
or Operating Partnership Unit option plans or similar compensation plan or any
grant or award made under any of the foregoing;
(c) violate or conflict with any regulation, rule, order, or administrative
position of NYSE, or any other national securities exchange on which the Company
Common Stock is listed;
(d) except as set forth in Schedule 3.4(d), violate or conflict with any
statute, regulation, judgment, order, writ, decree or injunction applicable to
the Company or its Subsidiaries;
(e) except as set forth in Schedule 3.4(e), violate or conflict with or
result in a breach of any provision of, or constitute a default (or any event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination or in a right of termination or cancellation of, or
accelerate the performance required by, or result in the creation of any Lien
upon any of the properties of the Company or its Subsidiaries under, or result
in being declared void, voidable or without further binding effect, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust or any license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which the Company or its Subsidiaries is
a party, or by which the Company or its Subsidiaries or any of their properties
is bound or affected; or
(f) except as set forth in Schedule 3.4(f), require any consent, approval or
authorization of, or declaration, filing or registration with, any Government
Authority, other than any filings required under the Securities Act of 1933, as
amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇
(▇▇▇ "▇▇▇ ▇▇▇"), ▇▇▇▇▇ securities laws ("Blue Sky Laws") (collectively, the
"Regulatory Filings"), and any filings required to be made with the Office of
the Secretary of the State of Delaware and NYSE or any other national securities
exchange on which the Company Common Stock is listed.
Section 3.5 "SEC and Other Documents, Financial Statements; Undisclosed
Liabilities." (a) The Company has delivered or made available to Buyer, or there
are commercially available to Buyer in the ordinary course, the registration
statement of the Company filed with the Securities and Exchange Commission
("SEC") in connection with the Company's exchange offering of Company Common
Stock for all the assets and liabilities of certain limited partnerships and the
subsequent distribution of such Company Common Stock to the limited partners
thereof, and all exhibits, amendments and supplements thereto (collectively, the
"Company Registration Statement"), and each registration statement, report,
proxy statement or information statement and all exhibits thereto prepared by it
or relating to its properties since the effective date of the Company
Registration Statement, which are set forth in Schedule 3.5(a), each in the form
(including exhibits and any amendments thereto) filed with the SEC
(collectively, the "Company Reports"). The Company Reports were filed with the
SEC in a timely manner and constitute all forms, reports and documents required
to be filed by the Company under the Securities Act, the Exchange Act and the
rules and regulations promulgated thereunder (the "Securities Laws"). As of
their respective dates, the Company Reports (i) complied as to form in all
material respects with the applicable requirements of the Securities Laws and
(ii) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that as to the compliance of the Company Reports
with the requirements of the Securities Laws, insofar as such representation is
made as to matters of form established in the Securities Laws, and assuming that
such Company Reports were prepared under the direction of
11
and with the advice of independent counsel and auditors to the Company, it is a
representation made to the company's Knowledge. There is no unresolved violation
or position asserted by any Government Authority with respect to any of the
Company Reports except as set forth in Schedule 3.5(a) with respect to the
Company's intended position in response to that certain letter of August 14,
1997, from the SEC (but excluding comments 9 and 11 therein, as to which the
Company has reached resolution as set forth in Schedule 3.5(a)). No such
unresolved violation or position (again, excluding comments 9 and 11 referred to
above) is or could be material to the Company or its business, operations or
financial position, nor could it reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect.
(b) Except as set forth in Schedule 3.5(b), each of the balance sheets
included in or incorporated by reference into the Company Reports (including the
related notes and schedules) fairly presented the financial position of the
entity or entities to which it relates as of its date and each of the statements
of operations, stockholders' equity (deficit) and cash flows included in or
incorporated by reference into the Company Reports (including any related notes
and schedules) fairly presented the results of operations, retained earnings or
cash flows, as the case may be, of the entity or entities to which it relates
for the periods set forth therein, in each case in accordance with United States
generally accepted accounting principles ("GAAP") consistently applied during
the periods involved except as may be noted therein and except, in, the case of
the unaudited statements, normal recurring year-end adjustments.
(c) Except as and to the extent set forth in the Company Reports or any
Schedule hereto, none of the Company or any of its Subsidiaries has any
Liabilities (nor do there exist any circumstances that would result in any
Liabilities).
Section 3.6 "Litigation, Compliance With Law." (a) Except as disclosed in
Schedule 3.6(a), there are no Actions pending or threatened against the Company
or any of its Subsidiaries which question the validity hereof or any action
taken or to be taken in connection herewith, and there are no continuing orders,
injunctions or decrees of any Government Authority to which the Company or any
of its Subsidiaries is a party or by which any of its properties or assets are
bound.
(b) To the Company's Knowledge, none of the Company or its Subsidiaries is in
violation of any statute, rule, regulation, order, writ, decree or injunction of
any Government Authority or any body having jurisdiction over them or any of
their respective properties, except as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, and except
as set forth in Schedule 3.6(b).
Section 3.7 "Absence of Certain Changes or Events." Except as disclosed in
the Company Reports filed with the SEC prior to the date hereof or in Schedule
3.7, since December 31, 1996, the Company and each of its Subsidiaries has
conducted its business only in the ordinary course of such business and has not
acquired any real estate or entered into any financing arrangements in
connection therewith, and there has not been (a) any change, circumstance or
event that would reasonably be expected to result in an adverse effect on the
business, operations or condition (financial or otherwise) of the Company, the
Operating Partnership and the Subsidiaries, considered as a whole, (b) any
declaration, setting aside or payment of any dividend or other distribution with
respect to the Company Common Stock, except in accordance with Section 5.5, (c)
any commitment, contractual obligation, borrowing, capital expenditure or
transaction (each, a "Commitment") entered into by the Company or any of its
Subsidiaries, or (d) any change in the Company's accounting principles,
practices or methods. The Company is not now contemplating entering into any
Commitment which, had it occurred on or before the date hereof would be required
to be disclosed in the Company Reports or in Schedule 3.7.
Section 3.8 "Tax Matters; REIT and Partnership Status." (a) The Company and
each of its Subsidiaries has timely filed with the appropriate taxing authority
all Tax Returns required to be filed by it or has timely requested extensions
and any such request has been granted and has not expired. Each such Tax Return
is complete and accurate in all respects. All Taxes shown as owed by the Company
or any of its Subsidiaries on any Tax Return have been paid or accrued, except
for Taxes being contested in good faith and for which adequate reserves have
been taken. The Company and each of its Subsidiaries has properly accrued all
Taxes for such periods subsequent to the periods covered by such Tax Returns as
required by GAAP. None of the Company or
12
any of its Subsidiaries has executed or filed with the IRS or any other taxing
authority any agreement now in effect extending the period for assessment or
collection of any Tax. Except as set forth in Schedule 3.8(a), none of the
Company or any of its Subsidiaries is a party to any pending action or
proceedings by any taxing authority for assessment or collection of any Tax, and
no claim for assessment or collection of any Tax has been asserted against it.
True and complete copies of all federal, state and local income and franchise
Tax Returns, or any extensions applicable thereto, filed by the Company and each
of its Subsidiaries for the taxable years 1994 to the present and all
communications relating thereto, have been delivered to Buyer or have been made
available to its representatives. To the Company's Knowledge, no claim has been
made by an authority in a jurisdiction where the Company or any of its
Subsidiaries does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. Except as set forth in Schedule 3.8(a), there is no
dispute or claim concerning any Tax liability of the Company or any of its
Subsidiaries claimed or raised by any taxing authority in writing. As of the
date hereof, (i) the Company is a "domestically-controlled" REIT within the
meaning of Code Section 897(h)(4)(B), and (ii) all non-domestic beneficial
owners of Company Common Stock are set forth in Schedule 3.8(a). Except as set
forth in Schedule 3.8(a), no person or entity which would be treated as an
"individual" for purposes of Section 542(a)(2) of the Code (as modified by
Section 856(h) of the Code) owns or would be considered to own (taking into
account the ownership attribution rules under Section 544 of the Code, as
modified by Section 856(h) of the Code) in excess of 9.8% of the value of the
outstanding equity interest in the Company. The Company is not "Pension-Held
REIT" within the meaning of Section 856(h)(3)(D) of the Code.
(b) The Company (i) intends in its federal income tax return for the tax year
ended December 31, 1997 and for the tax year that will end on December 31, 1998
to elect to be taxed as a real estate investment trust within the meaning of
Section 856 of the Code ("REIT") and has complied (or will comply) with all
applicable provisions of the Code relating to a REIT, (ii) has operated, and
intends to continue to operate, in such a manner as to qualify as a REIT, (iii)
has not taken or omitted to take any action which would reasonably be expected
to result in a challenge to its status as a REIT, and no such challenge is
pending or threatened, and (iv) assuming the accuracy of Buyer's representation
in Section 4.7, will not be rendered unable to qualify as a REIT for federal
income tax purposes as a consequence of the transactions contemplated hereby.
(c) Any amount or other entitlement that could be received (whether in cash
or property or the vesting of property) as a result of any of the transactions
contemplated hereby by any employee, officer, or director of the Company or the
Operating Partnership or any of their Affiliates who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation Section
1.280G-1) under any employment, severance or termination agreement, other
compensation arrangement or plan currently in effect would not be characterized
as an "excess parachute payment" (as such term is defined in Section 280G(b)(1)
of the Code).
(d) The disallowance of a deduction under Section 162(m) of the Code for
employee remuneration will not apply to any amount paid or payable by the
Company or any of its Subsidiaries under any contract, stock plan, program,
arrangement or understanding currently in effect.
(e) The Company was eligible to and did validly elect to be taxed as a REIT
for federal income tax purposes for calendar year 1991 and all subsequent
taxable periods. The Operating Partnership and each Subsidiary of the Company
and the Operating Partnership organized as a partnership (and any other
Subsidiary that files Tax Returns as a partnership for federal income tax
purposes) was and continues to be classified as a partnership for federal income
tax purposes.
Section 3.9 "Compliance with Agreements." (a) Neither the Company nor any of
its Subsidiaries is in default under or in violation of any provision of the
Company Charter, the By-laws of the Company or the Partnership Agreement (or
equivalent documents), except as set forth in Schedule 3.9(a).
(b) The Company and each of its Subsidiaries have filed all material reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to be with any Government
Authority and all other material reports and statements required to be filed by
them, including any report or statement required to be filed pursuant to the
laws, rules or regulations of the United States, and have
13
paid all fees or assessments due and payable in connection therewith, except as
set forth in Schedule 3.9(b). There is no unresolved violation asserted by any
regulatory agency, nor has the Company received notice from any regulatory
agency with respect to any report or statement relating to an examination of the
Company or any of its Subsidiaries.
(c) The Company Reports or Schedule 3.9(c) set forth (i) a description of all
material indebtedness of the Company and each of its Subsidiaries, whether
unsecured, secured or collateralized by mortgages, deeds of trust or other
security interests in the Company Properties or any other assets of the Company
and each of its Subsidiaries, or otherwise and (ii) each Commitment entered into
by the Company or any of its Subsidiaries (including any guarantees of any third
party's debt or any obligations in respect of letters of credit issued for the
Company's or any Subsidiary's account) which may result in total payments or
liability in excess of $250,000, excluding Commitments made in the ordinary
course of business with a maturity of less than one year or that are terminable
on 30 days or less notice. True and complete copies of the foregoing have been
delivered or made available to Buyer or to its representatives. Neither the
Company nor any of its Subsidiaries is in default and no event has occurred
which, with the giving of notice or the lapse of time or both, would constitute
a default, under any of the documents described in clause (i) or (ii) of this
paragraph or in respect of any payment obligations thereunder. All joint venture
and partnership agreements to which the Company or any of its Subsidiaries is a
party as of the date hereof are set forth in Schedule 3.9(c), all of which are
in full force and effect as against the Company or such Subsidiary and as
against the other parties thereto, and none of the Company or any of its
Subsidiaries is in default and no event has occurred which, with the giving of
notice or the lapse of time or both, would constitute a default, with respect to
any obligations thereunder. The other parties to such agreements are not in
breach of any of their respective obligations thereunder.
(d) Except as disclosed in the Company Reports or any other Schedule hereto,
and except as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, Schedule 3.9(d) sets forth a
complete and accurate list of all agreements entered into by the Company or any
of its Subsidiaries as of the date hereof relating to the development or
construction of, additions or expansions to, or management or leasing services
for real properties which are currently in effect and under which the Company or
any of its Subsidiaries currently has, or expects to incur, any material
obligation. True and complete copies of such agreements will be delivered or
made available to Buyer within five Business Days from the date hereof.
(e) Except as disclosed in the Company Reports, and except for agreements
made in the ordinary course of business with a maturity of less than one year or
that are terminable on 30 days or less notice, and except as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, Schedule 3.9(e) sets forth a complete and accurate list of all
agreements entered into by the Company as of the date hereof which are not
listed in any other Schedule hereto, including the material Debt Instruments.
Each agreement set forth in Schedule 3.9(e) is in full force and effect as
against the Company and, as against the other parties thereto, no payments, if
any, thereunder are delinquent, and no notice of default thereunder has been
sent or received by the Company or any of its Subsidiaries. There does not exist
under any agreement set forth in Schedule 3.9(e) any default, and no event has
occurred which, with notice or lapse of time or both, would constitute such a
default. True and complete copies of each such agreement have been delivered or
made available to Buyer.
(f) Schedule 3.9(f) sets forth a complete and accurate list of all
agreements, with their respective costing in spread sheet form, and policies (in
the case of policies which are not manifested by written agreement, Schedule
3.9(f) shall include a correct and complete written summary thereof) of the
Company in effect on the date hereof relating to transactions with affiliates
and potential conflicts of interest, excluding agreements with Partnership
Affiliates (defined below), but including such agreements with and such policies
relating to all Affiliates of the Company, including but not limited to The
Berkshire Group, and Affiliates of The Berkshire Group, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, and any Affiliate of a predecessor
organization of The Berkshire Group, or any of such Persons. Each agreement or
policy set forth in Schedule 3.9(f) is in full force and effect, and the
Company, each of its Subsidiaries, and the other parties thereto are in
compliance with such agreements and policies, or such compliance has been waived
by the Board of Directors as set forth in Schedule 3.9(f). True and complete
copies of each such agreement or policy have been delivered to Buyer or to its
representatives. As used herein, "Partnership Affiliate" means any limited
partnership in which a predecessor
14
organization of The Berkshire Group, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, or any of them
or their Affiliates, directly or indirectly, hold a general or limited partner
interest which is in no event less than or equal to 1% of the effective economic
interest in any such partnership, nor will any partnership interest in any such
partnership now or in the future held, directly or indirectly, by The Berkshire
Group, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, or any of them or their Affiliates, with the
passage of time or the occurrence of any event, or both, exceed 1% of any such
effective economic interest.
Section 3.10 "Financial Records; Company Charter and By-laws; Corporate
Records." (a) The books of account and other financial records of the Company
and each of its Subsidiaries are in all respects true and complete, have been
maintained in accordance with good business practices, and are accurately
reflected in all respects in the financial statements included in the Company
Reports, except as set forth in Schedule 3.10(a).
(b) The Company has previously delivered or made available to Buyer true and
complete copies of the Company Charter and the By-laws of the Company, as
amended to date, the Partnership Agreement, and the charter, by-laws,
organization documents, partnership agreements and joint venture agreements of
the Subsidiaries, and all amendments thereto. All such documents are listed in
Schedule 3.10(b). A chart of the Company, the Operating Partnership, and the
Subsidiaries showing ownership, voting or general partner rights and contractual
relationships is set forth in Schedule 3.10(b).
(c) The minute books and other records of corporate or partnership
proceedings of the Company and each of its Subsidiaries have been made available
to Buyer, contain in all material respects accurate records of all meetings and
accurately reflect in all material respects all other corporate action of the
stockholders and directors and any committees of the Board of Directors of the
Company and their Subsidiaries which are corporations and all actions of the
partners of the Operating Partnership and Subsidiaries which are partnerships,
except for documentation of discussions relating to or in connection with the
transactions contemplated hereby or matters related hereto, except as set forth
in Schedule 3.10(c).
Section 3.11 "Properties." (a) Schedule 3.11(a) sets forth a complete and
accurate list and the address of all real property directly or indirectly owned,
all or in part, or leased by the Company or any of its Subsidiaries or otherwise
used by the Company or its Subsidiaries in the conduct of their business or
operations (collectively, and together with the land at each address referenced
in Schedule 3.11(a) and all buildings, structures and other improvements and
fixtures located on or under such land and all easements, rights and other
appurtenances to such land, the "Company Properties"), other than the office
space leased by the Company from which the Company operates its business which
is listed separately on Schedule 3.11(a) as HQ Space (the "HQ Space"). The
Operating Partnership or, in the case of Company Properties owned by
Subsidiaries, certain of the Subsidiaries, owns good and marketable fee simple
title (or, if so indicated in Schedule 3.11(a), leasehold title) to each of the
Company Properties, in each case free and clear of any Liens, title defects,
contractual restrictions or covenants, laws, ordinances or regulations affecting
use or occupancy (including zoning regulations and building codes) or
reservations of interests in title (collectively, "Property Restrictions"),
except for (i) Permitted Liens and (ii) Property Restrictions imposed or
promulgated by law or by any Government Authority which are customary and
typical for similar multi-family residential or commercial properties. None of
the matters described in clauses (i) and (ii) of the immediately preceding
sentence materially interferes with, impairs, or is violated by, the existence
of any building or other structure or improvement which constitutes a part of,
or the present use, occupancy or operation (or, if applicable, development) of
the Company Properties taken as a whole. Except as set forth in Schedule 3.11(a)
and as to the Development Properties for which application for title policies
have been or are being made in the ordinary course and as to which the Company
has no reason to believe will not issue on customary terms and in customary and
marketable form (without exceptions which would render the subject Development
Properties unfinanceable), policies of title insurance (issued on customary
American Land Title Association forms) have been issued by national title
insurance companies insuring the fee simple or leasehold, as applicable, title
of the Operating Partnership or its Subsidiaries, as applicable, to each of the
Company Properties in amounts at least equal to the original cost thereof
subject only to Permitted Liens; such policies are valid and in full force and
effect and no claim has been made under any such policy, and the Company is not
aware of any fact or information which would constitute a defense by the issuer
of any such policy or an exclusion from coverage. True and complete
15
copies of all such policies together with all exceptions referenced therein and
the most recent title reports for and surveys of each of the Company Properties
available to the Company or any of its Subsidiaries have been made available by
the Company to Buyer or to its representatives.
(b) Except as set forth in Schedule 3.11(b), and except as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the use or occupancy (or, if applicable, development or
maintenance) of the Company Properties, any currently required certificate,
permit or license (including building permits and certificates of occupancy for
tenant spaces) from any Government Authority having jurisdiction over any
Company Property or any agreement, easement or other right which is necessary to
permit the lawful use, occupancy or operation of the existing buildings,
structures or other improvements which constitute a part of any of the Company
Properties or which are necessary to permit the lawful use and operation of
utility service to any Company Property or of any existing driveways, roads or
other means of egress and ingress to and from any of the Company Properties has
been obtained and is in full force and effect, and there are no pending threat
of modification or cancellation of any of same, and there is no violation by any
Company Property of any federal, state or municipal law, ordinance, order,
regulation or requirement, including any applicable zoning law or building code,
as a result of the use or occupancy of such Company Property or otherwise.
Except as set forth in Schedule 3.11(b), there is no uninsured physical damage
to any Company Property in excess of $100,000. Except for repairs identified in
the Capital Expenditure Budget and Schedule, each Company Property, (i) is in
good or better operating condition and repair and is structurally sound and free
of defects, with no material alterations or repairs being required thereto under
applicable law or insurance company requirements, and (ii) consists of
sufficient land, parking areas, driveways and other improvements and lawful
means of access and utility service and capacity to permit the use thereof in
the manner and for the purposes to which it is presently devoted (or, in the
case of the Development Property, for the development and operation thereon of
the applicable Project), except, in each such case, to the extent that failure
to meet such standards would adversely affect the use or occupancy of the
Company Properties taken as a whole (or, in the case of the Development
Property, the development and operation thereon of the applicable Project). The
Company has made available to Buyer or to its representatives true and complete
copies of all engineering reports, inspection reports, maintenance plans and
other documents relating to the condition of any Company Property prepared for
the Company or otherwise in the Company's or any Subsidiary's possession.
(c) Except as set forth in Schedule 3.11(c), and, except as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, (i) no condemnation, eminent domain or rezoning proceedings are
pending or threatened with respect to any of the Company Properties, (ii) no
road widening or change of grade of any road adjacent to any Company Property is
underway or has been proposed, (iii) no proposed change in the assessed
valuation of any Company Property, (iv) no special assessment has been made or
threatened against any Company Property, and (v) no Company Properties are
subject to any so-called "impact fee" or to any agreement with any Government
Authority to pay for sewer extension, oversizing utilities, lighting or like
expenses or charges for work or services by such Government Authority.
(d) Each of the Company Properties is an independent unit which does not rely
on any facilities located on any property not included in such Company Property
to fulfill any municipal or governmental requirement or for the furnishing to
such Company Property of any essential building systems, utilities or customary
amenities, other than facilities the benefit of which inures to the Company
Properties pursuant to one or more valid easements, or facilities which are
located on or abutting Company Properties and are sufficient to serve more than
one property adequately and lawfully. Each of the Company Properties is served
by public water and sanitary systems and all other utilities, and each of the
Company Properties has lawful access to public roads, in all cases sufficient
for the current use and occupancy of each Company Property (or, in the case of
the Development Property, for the development and operation thereon of the
applicable Project). All parcels of land included in each Company Property that
purport to be contiguous are contiguous and are not separated by strips, gaps or
gores. No portion of any Company Property lies in any flood plain area (as
defined by the U.S. Army Corps of Engineers or otherwise) or includes wetlands
or vegetation or species protected by any applicable laws. No improvements
constituting a part of any Company Property encroach on real property not
constituting a part of such Company Property or an abutting Company Property.
16
(e) The Company has supplied or made available to Buyer each survey, study or
report prepared by or for the Company or any of the Subsidiaries in connection
with any Company Property's compliance or non-compliance with the requirements
of the Americans with Disabilities Act (the "ADA"), other than routine
correspondence or memoranda. Except as set forth in Schedule 3.11(e), and except
as could not, individually or in the aggregate, be reasonably expected to result
in a Material Adverse Effect, no Company Property fails to comply with the
Requirements of the ADA.
(f) The Company has provided to Buyer an accurate rent roll for each Company
Property (collectively, the "Rent Rolls") as of the month ended July 31, 1997
all of which remain true, correct and complete as of the date hereof, except for
immaterial variations in the ordinary course of business, which identifies and
accurately describes each lease of space in each Company Property (collectively,
the "Company Leases") and sets forth the vacancy for each.
(g) Schedule 3.11(g) sets forth a complete and accurate list of all material
commitments, letters of intent or similar written understandings made or entered
into by the Company or any of its Subsidiaries as of the date hereof (x) to
lease any space larger than 25,000 rentable square feet at any of the Company
Properties, (y) to sell, mortgage, pledge, hypothecate any Company Property or
to otherwise enter into a material transaction in respect of the ownership or
financing of any Company Property, or (z) to purchase or acquire an option,
right of first refusal or similar right in respect of any real property, which,
in any such case, has not yet been reduced to a written lease or contract, and
sets forth with respect to each such commitment, letter of intent or other
understanding the principal terms thereof. The Company has previously delivered
or made available to Buyer a true and complete copy of each such commitment,
letter of intent or other understanding.
(h) Except as set forth in Schedule 3.11(h), the Company, the Operating
Partnership and all the Subsidiaries have the right, including, but not limited
to, to sell, transfer, lease, finance, without limitation, all of the Company
Properties. Except for certain rights of first refusal which are set forth in
the sections of the partnership agreements referenced in Schedule 3.1(e) and
which relate to partnerships in which the Company, directly or indirectly, owns
less than a 100% interest, none of the Company or any of its Subsidiaries has
granted any outstanding options or has entered into any outstanding contracts
with others for the sale, mortgage, pledge, hypothecation, assignment, sublease,
lease or other transfer of all or any part of any Company Property, and no
person has any right or option to acquire, or right of first refusal with
respect to, the Company's or any of its Subsidiaries' interest in any Company
Property or any part thereof. Except as set forth in Schedule 3.11(h) none of
the Company or any of its Subsidiaries has any outstanding options or rights of
first refusal or has entered into any outstanding contracts with others for the
purchase of any real property.
(i) Schedule 3.11(i) contains a complete and accurate description of any
noncompliance by any Company Property, with any law, ordinance, code, health and
safety regulation or insurance requirement (except for the ADA, which is
addressed in this respect in Section 3.11(e) above), except as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has provided the Company's or any Subsidiary's
capital expenditure budget and schedule for each Company Property (the "Capital
Expenditure Budget and Schedule"), which describes the capital expenditures
which the Company or any Subsidiary has budgeted for such Company Property for
the period running through at least December 31, 2002, and such other capital
expenditures as are necessary in order to bring such Company Property into
compliance with applicable laws, ordinances, codes, health and safety
regulations and insurance requirements (including fire sprinklers, compliance
with the ADA abatement or maintenance of asbestos containing material, and
mitigation for radon) or which the Company otherwise plans or expects to make in
order to cure or remedy any construction, electrical, mechanical or other
defects, to renovate, maintain, rehabilitate or modernize such Company Property,
or otherwise, excluding, however, any tenant improvements required to be made
under any Company Lease. The costs and time schedules for 1997 and subsequent
years set forth in each Capital Expenditure Budget and Schedule are reasonable
estimates and projections. The Capital Expenditure Budget and Schedule for each
Company Property (i) has been established and timely implemented since each
Company Property was acquired by the Company (whether by purchase or as a result
of initial formation transactions), (ii) has a time period of not less than five
years, and (iii) has been provided to Buyer in a true, correct and complete form
as in effect on the date hereof and the amounts set forth
17
therein represents the good faith business judgment of the Company as to all
known maintenance and capital expenditure items for such Company Property.
Except as set forth in Schedule 3.11(i), there are no outstanding or threatened
requirements by any insurance company which has issued an insurance policy
covering any Company Property, or by any board of fire underwriters or other
body exercising similar functions, requiring any repairs or alterations to be
made to any Company Property.
(j) Schedule 3.11(j) contains a list of each Company Property, or property
which the Company has under letter of intent or option, which consists of or
includes undeveloped land or which is intended to be or is in the process of
being developed or rehabilitated (collectively, the "Development Properties")
and a brief description of the development or rehabilitation intended by the
Company or any Subsidiary to be carried out or completed thereon (collectively,
the "Projects"), including any budget and development or rehabilitation schedule
therefor prepared by or for the Company or any Subsidiary (collectively, the
"Development Budget and Schedule"). Each Development Property is zoned for the
lawful development thereon of the applicable Project, and the Company or its
Subsidiaries have obtained all permits, licenses, consents and authorizations
required for the lawful development or rehabilitation thereon of such Project.
Except as set forth in Schedule 3.11(j), there are no material impediments to or
constraints on the development or rehabilitation of any Project within the time
frame and for the cost set forth in the Development Budget and Schedule
applicable thereto. In the case of each Project the development of which has
commenced, the costs and expenses incurred in connection with such Project and
the progress thereof are, except as set forth in Schedule 3.11(j), consistent
and in compliance in all material respects with all aspects of the Development
Budget and Schedule applicable thereto. The Company has made available to Buyer
or to its representatives all feasibility studies, soil tests, due diligence
reports and other studies, tests or reports performed by or for the Company, or
otherwise in the possession of the Company, which relate to the Development
Properties or the Projects.
(k) Except as set forth in Schedule 3.11(k), and except as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, the Company has disclosed to Buyer all adverse matters known to
the Company with respect to or in connection with the Company Properties and the
HQ Space (including the Company Leases and the Tenancy Leases).
(l) The leases for the HQ Space and the ground leases underlying the leased
Company Properties referenced in Schedule 3.11(a), if any (collectively, the
"Tenancy Leases"), are accurately described in Schedule 3.11(l). Each of the
Tenancy Leases is valid, binding and in full force and effect as against the
Subsidiary and as against the other party thereto. Except as indicated in
Schedule 3.11(l), none of the Tenancy Leases is subject to any pledge, lien,
sublease, assignment, license or other agreement granting to any third party any
interest therein or any right to the use or occupancy of any premises leased
thereunder. True and complete copies of the Tenancy Leases (including all
amendments, modifications and supplements thereto) will be delivered to Buyer
within five Business Days from the date hereof. Except as set forth in Schedule
3.11(l), there is no pending or threatened proceeding which is reasonably likely
to interfere with the quiet enjoyment of the tenant under any of the Tenancy
Leases. Except as set forth in Schedule 3.11(l), no payments under any Tenancy
Lease are delinquent and no notice of default thereunder has been sent or
received by the Company or any of its Subsidiaries, and there does not exist
under any of the Tenancy Leases any default, and no event has occurred which,
with notice or lapse of time or both, would constitute such a default.
(m) The Company and each of its Subsidiaries have good and sufficient title
to all the personal and non-real properties and assets reflected in their books
and records as being owned by them (including those reflected in the balance
sheets of the Company and its Subsidiaries as of June 30, 1997, except as since
sold or otherwise disposed of in the ordinary course of business), free and
clear of all Liens, except for Permitted Liens, as set forth in Schedule
3.11(m).
Section 3.12 "Environmental Matters." (a) Each of the Company and its
Subsidiaries has obtained, and now maintains as currently valid and effective,
all permits required under the Environmental Laws (the "Environmental Permits")
in connection with the operation of its businesses and properties, all of which
are listed in Schedule 3.12(a). Except as disclosed in the Executive Summaries
of the Company Environmental Reports and
18
except for any Company Property non-compliance as could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect, each of
the Company and its Subsidiaries, and each Company Property is, has been, and
will be in compliance with all terms and conditions of the Environmental Permits
and all Environmental Laws.
(b) To the Company's Knowledge, each of the Company and its Subsidiaries has
provided to Buyer all written information and written communications (whether
from a Government Authority, citizens' group, employee or other person) in its
possession or control regarding (x) alleged or suspected noncompliance of any of
the Company Properties with any Environmental Laws or Environmental Permits or
(y) alleged or suspected liability of the Company or its Subsidiaries under any
Environmental Law.
(c) There are no environmental liens or encumbrances on any of the Company
Properties and no government actions have been taken or are in process which are
reasonably likely to subject any Company Property to such liens or other
encumbrances.
(d) No Environmental Claim with respect to the operations or the businesses
of the Company or its Subsidiaries, or with respect to any of the Company
Properties, has been asserted or, to the Company's Knowledge, threatened, and no
circumstances exist with respect to the Company or its Subsidiaries or the
Company Properties that would reasonably be expected to result in any
Environmental Claim being asserted, in any such case, against (i) the Company or
its Subsidiaries, or (ii) any person whose liability for any Environmental
Claims the Company or its Subsidiaries has or may have retained or assumed
either contractually or by operation of law.
(e) Except as disclosed in Schedule 3.12(e) or set forth in the Executive
Summaries of the Company Environmental Reports and, except as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, (i) none of the Company or its Subsidiaries has been notified or
anticipates being notified of potential responsibility in connection with any
site that has been placed on, or proposed to be placed on, the National
Priorities List or its state or foreign equivalents pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. ss. 9601 et seq., or analogous state or foreign laws, (ii) no
Materials of Environmental Concern are present on, in or under any Company
Property in a manner or condition that is reasonably likely to give rise to an
Environmental Claim, (iii) none of the Company or its Subsidiaries has Released
or arranged for the Release of any Materials of Environmental Concern at any
location, (iv) no underground storage tanks, surface impoundments, disposal
areas, pits, ponds, lagoons, open trenches or disused industrial equipment is
present at any Company Property, (v) no transformers, capacitors, ballasts or
other equipment containing fluid with more than 50 parts per million
polychlorinated biphenyls are present at any Company Property, except for any
such transformers, capacitators, ballasts or other equipment owned by any
utility company, and (vi) no asbestos or asbestos-containing material is present
at any Company Property or at the HQ Space and no employee, agent, contractor or
subcontractor of the Company or its Subsidiaries is now or has in the past been
exposed to friable asbestos or asbestos-containing material at any Company
Property or at the HQ Space.
(f) The Company has provided the most recent Phase I environmental report
prepared for the Company or its Subsidiaries or otherwise in the possession of
any of them with respect to the environmental condition of any Company Property
(collectively, the "Company Environmental Reports"). True and complete copies of
the executive summaries or conclusions included in the Company Environmental
Reports (collectively, the "Executive Summaries of the Company Environmental
Reports") have previously been delivered by the Company to Buyer. True and
complete copies of each of the Company Environmental Reports have been delivered
or made available to Buyer or to its representatives. The Executive Summaries of
the Company Environmental Reports disclose all matters known to the Company in
respect of the environmental condition (including violations of Environmental
Laws, Environmental Claims and the presence or Release of any Materials of
Environmental Concern) of the Company Properties (it being understood, however,
that reference in the Executive Summaries of the Company Environmental Reports
to other environmental reports, investigations, assessments or other documents
shall not constitute disclosure of the contents thereof except to the extent
such contents are fully in the Executive Summaries of the Company Environmental
Reports).
19
(g) For purposes hereof, the terms listed below shall have the following
meanings:
(i) "Claim" shall mean all actions, causes of action, suits, debts,
dues, accounts, reckonings, bonds, bills, covenants, contracts,
controversies, promises, trespasses, damages, judgments, executions,
claims, liabilities and demands whatsoever, in law or equity.
(ii) "Environmental Claim" shall mean any Claim, investigation or
notice (written or oral) by any person alleging potential liability
(including potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or fatalities, or penalties) arising out of, based on
or resulting from (A) the presence, generation, transportation,
treatment, use, storage, disposal or Release of Materials of
Environmental Concern or the threatened Release of Materials of
Environmental Concern at any location, or (B) activities or conditions
forming the basis of any violation, or alleged violation of, or liability
or alleged liability under, any Environmental Law.
(iii) "Environmental Laws" shall mean federal, state, local,
provincial, municipal and foreign laws, ordinances, principles of common
law, rules, by-laws, orders, governmental policies, statutes,
regulations, agreements, treaties, customary law, and international
principles relating to the pollution or protection of the environment or
of flora or fauna or their habitat or of human health and safety, or to
the cleanup or restoration of the environment, including, but not limited
to, any laws relating to (A) generation, treatment, storage, disposal or
transportation of wastes, emissions or discharges or protection of the
environment from the same, (B) exposure of persons to, or Release or
threat of Release of, Materials of Environmental Concern, (C) noise, (D)
repetitive motion, and (E) the safety and health of workers and
employees.
(iv) "Materials of Environmental Concern" shall mean all chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum or any
fraction thereof, petroleum products and hazardous substances (as defined
in Section 101(14) of CERCLA, 42 U.S.C. ss. 6601(14)), or solid or
hazardous wastes as now defined and regulated under any Environmental
Laws.
(v) "Release" shall mean any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration.
Section 3.13 "Employees and Employee Benefit Plans." (a) Schedule 3.13(a).
sets forth a complete and accurate list of all employment agreements with
employees of the Company or any of its Subsidiaries. Except for the employees
who are parties to such employment agreements, all of the employees of the
Company and each of its Subsidiaries are employed on an at-will basis (except
for restrictions or limitations on the at-will basis of such employees imposed
by general principles of law or equity).
(b) The Company Reports or Schedule 3.13(b) sets forth a complete and
accurate list of all Employee Benefit Plans and all material Benefit
Arrangements which affect Employees of the Company or any of its Subsidiaries
(the "Company Plans"). With respect to each Company Plan, the Company has made
available to Buyer or to its representatives, true and complete copies of. (i)
the plans and related trust documents and amendments thereto, (ii) the most
recent summary plan descriptions, if any, and the most recent annual report, if
any, and (iii) the most recent actuarial valuation (to the extent applicable).
(c) With respect to each Company Plan, (i) the Company and each of its
Subsidiaries is in compliance in all material respects with the terms of each
Company Plan and with the requirements prescribed by all applicable statutes,
orders or governmental rules or regulations, (ii) the Company and each of its
Subsidiaries has contributed to each Pension Plan included in the Company Plans
not less than the amounts accrued for such plan for all plan periods for which
payment is due, and (iii) none of the Company or any of its Subsidiaries has any
funding commitment or other liabilities except as reserved for in the financial
statements in or incorporated by reference into the Company Reports, and, in the
case of clause (i) through (iii), as is set forth in Schedule 3.13(c).
20
(d) None of the Company or any of its Subsidiaries has made any commitment to
establish any new Employee Benefit Plan, to modify any Employee Benefit Plan, or
to increase benefits or compensation of Employees of the Company or any of its
Subsidiaries (except for normal increases in compensation consistent with past
practices), and no intention to do so has been communicated to Employees of the
Company or any of its Subsidiaries.
(e) There are no pending or anticipated claims against or otherwise involving
any of the Company Plans or any fiduciaries thereof with respect to their duties
to the Plans and no suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of Company Plan activities) has been
brought against or with respect to any such Company Plans.
(f) Neither the Company, the Operating Partnership or any entity under
"common control" with the Company or the Operating Partnership within the
meaning of Section 4001 of ERISA has contributed to, or been required to
contribute to, any "multiemployer plan" (as defined in Section 3(37) and
4001(a)(3) of ERISA).
(g) Except as set forth on Schedule 3.13(g), the Company and its Subsidiaries
do not maintain or contribute to any plan or arrangement which provides or has
any liability to provide life insurance, medical or other employee welfare
benefits to any Employee or former Employee upon his retirement or termination
of employment and the Company and its Subsidiaries have never represented,
promised or contracted (whether in oral or written form) to any employee or
former employee that such benefits would be provided.
(h) For purposes hereof, "Employee Benefit Plans" means each and all
"employee benefit plans" as defined in Section 3(3) of ERISA maintained or
contributed to by a party hereto or in which a party hereto participates or
participated and which provides benefits to Employees, including (i) any such
plan that are "employee welfare benefit plans" as defined in Section 3(l) of
ERISA, including retiree medical and life insurance plans ("Welfare Plans"), and
(ii) any such plans that constitute "employee pension benefit plans" as defined
in Section 3(2) of ERISA ("Pension Plans"). "Benefit Arrangements" means life
and health insurance, hospitalization, savings, bonus, deferred compensation,
incentive compensation, holiday, vacation, severance pay, sick pay, sick leave,
disability, tuition refund, service award, company car, scholarship, relocation,
patent award, fringe benefit, individual employment, consultancy or severance
contracts and other polices or practices of a party hereto providing employee or
executive compensation or benefits to Employees, other than Employee Benefit
Plans. "Employees" mean all current employees, former employees and retired
employees of a party hereto or any of its Subsidiaries, including employees on
disability, layoff or leave status. "Controlled Group Liability" means any and
all liabilities under (i) Title IV of ERISA, (H) Section 302 of ERISA, (iii)
Sections 412 and 4971 of the Code, (iv) the continuation coverage requirements
of Section 601 et seq, of ERISA and Section 4980B of the Code, and (v)
corresponding or similar provisions of foreign laws or regulations, other than
such liabilities that arise solely out of, or relate solely to, the Plans.
(i) With respect to each plan that is subject to Title IV or Section 302 of
ERISA or Section 412 or 4971 of the Code: (i) there does not exist any
accumulated funding deficiency within the meaning of Section 412 of the Code or
Section 302 of ERISA, whether or not waived, (ii) the fair market value of the
assets of such plan equals or exceeds the actuarial present value of all accrued
benefits under plan (whether or not vested), on a termination basis, (iii) no
reportable event within the meaning of Section 4043(c) of ERISA has occurred,
and the consummation of the transactions contemplated by this agreement will not
result in the occurrence of any such reportable event, and (iv) all premiums to
the Pension Benefit Guaranty Corporation have been timely paid in full.
(j) There does not now exist, nor do any circumstances exist that could
result in, any Controlled Group liability that would be a liability of the
Company following the Closing. Without limiting the generality of the foregoing,
neither the Company nor any ERISA Affiliate has engaged in any transaction
described in Section 4069 or Section 4204 of ERISA.
(k) Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will (either alone or in conjunction
with any other event) result in, cause the accelerated vesting
21
or delivery of, or increase the amount or value of, any payment or benefit to
any employee of the Company, except as set forth in Schedule 3.13 (k).
Section 3.14 "Labor Matters." Except as set forth in Schedule 3.14, none of
the Company or any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor union organization. Except for the matters set forth
in Schedule 3.14, there is no unfair labor practice or labor arbitration
proceeding pending or threatened against the Company or any of its Subsidiaries.
There are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of the Company or any of its Subsidiaries.
Section 3.15 "Affiliate Transactions." Schedule 3.15 sets forth a complete
and accurate list of all transactions, series of related transactions or
currently proposed transactions or series of related transactions entered into
by the Company or any of its Subsidiaries since January 1, 1991 which are of the
type required to be disclosed by the Company pursuant to Item 404 of Regulation
S-K of the Securities Laws or, if not of such type, are of a nature referenced
in Section 3.9(f) hereof. A true and complete copy of all agreements or
contracts relating to any such transaction has been made available to Buyer.
Schedule 3.15 sets forth an accounting of such transactions regarding
participatory interests, the allocation of overhead and expenses thereunder, and
all other matters material to each of such agreements or contracts.
Section 3.16 "Insurance." The Company and the Operating Partnership maintain
insurance policies covering the assets, business, equipment, properties,
operations, employees, officers and directors of the Company and each of its
Subsidiaries (collectively, the "Insurance Policies") which are of a type and in
amounts customarily carried by persons conducting businesses similar to those of
the Company and the Operating Partnership. There is no material claim by the
Company or any of its Subsidiaries pending under any of the material Insurance
Policies as to which coverage has been questioned, denied or disputed by the
underwriters of such policies.
Section 3.17 "Delaware Takeover Law." The terms of Section 203 of the General
Corporation Law of the State of Delaware will not apply to Buyer, any Stock
Purchase or any other transaction contemplated hereby.
Section 3.18 "Brokers or Finders." No agent, broker, investment banker or
other firm or person, including any of the foregoing that is an Affiliate of the
Company with which the Company dealt, is or will be entitled to any broker's or
finder's fee or any other commission or similar fee from the Company in
connection with this Agreement or any of the transactions contemplated hereby
for which Buyer will be responsible.
Section 3.19 "Disclosure of Facts." There are no facts peculiar to the
Company or the Operating Partnership that the Company has not disclosed to
Buyer, nor, is there a reasonable likelihood that there will occur any event
that could, individually or in the aggregate, reasonably to be expected to have
a Material Adverse Effect on the business, financial condition, assets, results
of operations or prospects of the Company, the Subsidiaries, or the Operating
Partnership.
Section 3.20 "REOC Status." (a) The Company was incorporated as a Delaware
corporation in November, 1990 and from its date of incorporation until July 1,
1991, the Company conducted no business and owned no assets.
(b) As of the date of the Company's first long-term investment that was not a
short-term investment of funds pending long-term commitment, i.e., July 1, 1991
(the "REOC Qualification Date"), and continuously thereafter to and including
the Initial Closing, at least 50 percent of the assets of the Company (other
than short-term investments pending long-term commitment or distribution to
investors), valued at cost, have been invested in real estate which has been
under active development or management by the Company.
(c) The Company has been actively engaged in the management or development of
real estate in the ordinary course of its business at all times from the REOC
Qualification Date to and including the Initial Closing.
22
(d) The "real estate" referenced above which was purchased on the REOC
Qualification Date and thereafter includes the Company Properties. To the extent
any of the Company Properties are subject to tenant leases (the "Leases"), the
Company has substantial responsibilities under each of the Leases, and none of
the Leases provides that substantially all management and maintenance activities
with respect to the Company Property in question or any portion thereof are the
responsibility of the tenant lessees.
(e) The Company has not merely passively assumed the risks of its real estate
ownership, but the return to its stockholders from its investment in the Company
Properties has been and is based in part on the cash flow and capital
appreciation of the Company Properties, and such return depends in substantial
part on the success of the Company's management and development efforts with
respect to the Company Properties.
(f) The employees of the Company perform most of the development and
management functions of the real estate business described herein, except that
the Company has employed independent contractors, each of which is terminable
without cause and without substantial penalty upon reasonably short notice, to
perform certain of the day-to-day management activities associated with the
Company Properties. In any event, the Company represents and warrants that it
has devoted substantial resources to such management and development activities
and to the oversight of its independent contractors who perform such activities
from the REOC Qualification Date to and including the Initial Closing.
(g) The Company covenants and warrants that it will comply with all
requirements, and take all actions and cause its subsidiaries to take all
actions necessary, to maintain its status as a "real estate operating company"
as such term is defined in 29 C.F.R. ss. 2510.3-101. Specifically, but without
limitation, the Company covenants that it has or it will establish an "annual
valuation period", which will be an annual period of no more than 90 days that
will begin no later than the anniversary of the REOC Qualification Date, and
that on at least one day within each annual valuation period, the Company will
maintain the investment of at least 50 percent of its assets (other than
short-term investments pending long-term commitment or distribution to
investors), valued at cost, in real estate which is under active development or
management by the Company as described above. The Company also covenants to
devote substantial resources to the management of the real estate it owns, and
continuously to remain actively engaged in the management or development of real
estate in the ordinary course of its business. The Company agrees to cooperate
with Buyer and to furnish such additional information as may be reasonably
requested by Buyer to evidence the actions indicated above.
Section 3.21 "Knowledge Defined." As used herein, the phrase "to the
Company's Knowledge" (or words of similar import) means actual knowledge of
those individuals identified in Schedule 3.21, and includes any facts, matters
or circumstances set forth in any written notice from any Government Authority
or any other material written notice received by the Company or any Subsidiary,
and also includes any matter of which Buyer informs the Company in writing.
Section 3.22 "Construction of Material Adverse Effect." For purposes of the
construction of any representation and warranty in this Section 3, and as to the
accuracy thereof, the term "Material Adverse Effect" shall be considered in each
and every event on an aggregate basis with all other representations and
warranties which contain an exception for Material Adverse Effect such that, if
and when one or more of such representations and warranties, considered in the
aggregate, prove to be inaccurate to the extent that an aggregate of $3,000,000
in Loss or Liability is exceeded, then all such representations and warranties
which are subject to exception based on Material Adverse Effect shall, if
inaccurate in any respect, be deemed to be inaccurate without regard to an
exception for Material Adverse Effect and the amount or amounts involved in each
such inaccuracy shall be determined as if no such exception was present.
23
ARTICLE 4
Representations and Warranties of Buyer
Buyer hereby represents and warrants to the Company as follows:
Section 4.1 "Organization." Buyer is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has all requisite power and authority to own, operate, lease and
encumber its properties and carry on its business as now conducted, and to enter
into this Agreement and the Registration Rights Agreement, and to perform its
obligations hereunder and thereunder.
Section 4.2 "Due Authorization." The execution, delivery and performance of
this Agreement and the Registration Rights Agreement have been duly and validly
authorized by all necessary action on the part of Buyer. This Agreement has been
duly executed and delivered by Buyer for itself and constitutes the valid and
legally binding obligations of Buyer, enforceable against Buyer, in accordance
with its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights or general principles of
equity.
Section 4.3 "Conflicting Agreements and Other Matters." Neither the execution
and delivery of this Agreement, nor the performance by Buyer of its obligations
hereunder, will conflict with, result in a breach of the terms, conditions or
provisions of, constitute a default under, result in the creation of any
mortgage, security interest, encumbrance, lien or charge of any kind upon any of
the properties or assets of Buyer, pursuant to, or require any consent, approval
or other action by or any notice to or filing with any Government Authority
pursuant to, the organizational documents or agreements of Buyer, or any
agreement, instrument, order, judgment, decree, statute, law, rule or regulation
by which Buyer is bound, except for filings after any Closing under Section
13(d) of the Exchange Act.
Section 4.4 "Acquisition for Investment, Sophistication, Source of Funds."
Buyer is acquiring the Company Preferred Stock being purchased by it for its own
account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof, and (except for the possible
contemplated sale by Buyer of shares of Company Preferred Stock to ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Real Estate Special Situations, Inc., affiliated partnerships and funds
advanced by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Asset Management, Inc., or by its Affiliates) Buyer
has no present intention or plan to effect any distribution of shares of Company
Preferred Stock, provided that the disposition of Company Preferred Stock owned
by Buyer shall at all times be and remain within its control, subject to the
provisions of this Agreement and the Registration Rights Agreement. Buyer is
able to bear the economic risk, and will be supplied with the funds for, the
acquisition of Company Preferred Stock pursuant hereto and can afford to sustain
a total loss on such investment, and has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of the proposed investment, and therefore has the capacity to protect its
own interests in connection with the acquisition of Company Preferred Stock
pursuant hereto.
Section 4.5 "Brokers or Finders." Except for the fees of Triton Pacific,
L.L.C. (which the Company has represented to Buyer has been retained by the
Company as its sole broker and the fees of which will be paid by the Company at
the Initial Closing), no agent, broker, investment banker or other firm or
person, including any of the foregoing that is an Affiliate of Buyer with which
the Buyer dealt, is or will be entitled to any broker's or finder's fee or any
other commission or similar fee from Buyer in connection with this Agreement or
any of the transactions contemplated hereby for which the Company will be
responsible.
Section 4.6 "REIT Qualification Matters." No person which would be treated as
an "individual" for purposes of Section 542(a)(2) of the Code (as modified by
Section 856(h) of the Code) owns or would be considered to own (taking into
account the ownership attribution rules under Section 544 of the Code, as
modified by Section 856(h) of the Code) in excess of 9.8% of the value of the
outstanding equity interest in Buyer.
24
Section 4.7 "Investment Company Matters." Buyer is, and after giving effect
to the purchase of Company Preferred Stock contemplated hereby, will not be, an
"investment company" or an entity "controlled" by an "investment company," as
such terms are defined in the Investment Company Act of 1940, as amended.
ARTICLE 5
Representations and Covenants Relating to Closings
Section 5.1 "Taking of Necessary Action." Each of Buyer and the Company
agrees to use its commercially reasonable best efforts promptly to take, or
cause to be taken, all action and promptly to do or cause to be done all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Registration Rights Agreement, subject to the terms and conditions
hereof and thereof.
Section 5.2 "Company Preferred Stock, Certificate of Designation; By-laws."
At or before the Initial Closing, the Company shall cause to be duly executed
and filed with the Office of the Secretary of the State of Delaware, the
Certificate of Designation in the form attached as Exhibit A.
Section 5.3 "Public Announcements; Confidentiality." (a) Subject to each
party's disclosure obligations imposed by law and any stock exchange or similar
rules and the confidentiality provisions contained in Section 5.5(b), the Buyer
shall have the right to review the development and distribution of all news
releases and other public information disclosures with respect to this Agreement
and the Registration Rights Agreement, and any of the transactions contemplated
hereby or thereby. Buyer shall also have the right to review and, before filing
or other public dissemination, approve (which approval will not be unreasonably
withheld or delayed) any statements made or information provided with respect to
it, the Advancing Party or to the transactions contemplated by this Agreement,
including, without limitation, such statements intended to be included in any
future Regulatory Filing prepared by or on behalf of the Company.
(b) Buyer agrees that all information provided to Buyer or any of its
representatives pursuant to this Agreement shall be kept confidential, and Buyer
shall not disclose such information to any persons other than the directors,
officers, employees, financial advisors, legal advisors, accountants,
consultants and affiliates of Buyer who reasonably need to have access to the
confidential information and who are advised of the confidential nature of such
information; provided, however, the foregoing obligation of Buyer shall not (i)
relate to any information that (1) is or becomes generally available other than
as a result of unauthorized disclosure by Buyer or by persons to whom Buyer has
made such information available, or (2) is or becomes available to Buyer on a
non-confidential basis from a third party that is not bound by any other
confidentiality agreement with the Company, or (ii) prohibit disclosure of any
information if required by law, rule, regulation, court order or other legal or
governmental process.
(c) The Company agrees that all information provided to the Company or any of
its representatives pursuant to this Agreement shall be kept confidential, and
the Company shall not disclose such information to any persons other than the
directors, officers, employees, financial advisors, legal advisors, accountants,
consultants and affiliates of the Company who reasonably need to have access to
the confidential information and who are advised of the confidential nature of
such information; provided, however, the foregoing obligation of the Company
shall not (i) relate to any information that (1) is or becomes generally
available other than as a result of unauthorized disclosure by the Company or by
persons to whom the Company has made such information available, or (2) is or
becomes available to the Company on a non-confidential basis from a third party
that is not bound by any other confidentiality agreement with the Company, or
(ii) prohibit disclosure of any information if required by law, rule,
regulation, court order or other legal or governmental process.
Section 5.4 "Conduct of the Business." Except for transactions contemplated
hereby, during the period from the date hereof to the date of the Initial
Closing, the Company will, except as otherwise consented to or
25
approved by Buyer in writing or as permitted or required hereby, conduct the
business of the Company and its Subsidiaries and engage in transactions only in
the ordinary course, and during the period from the date hereof to the date on
which there shall be outstanding no shares of Company Preferred Stock, the
Company will not, except as otherwise consented to or approved by Buyer in
writing or as permitted or required hereby, (i) change or fail to change any
provision of the Company Charter or the Amended Company By-laws in a manner that
would be adverse to Buyer, or (ii) conduct the business of the Company and its
Subsidiaries and engage in transactions except in the ordinary course, except as
is permitted by the Certificate of Designation.
Section 5.5 "No Solicitation of Transactions." Until the Remaining Equity
Commitment shall be zero, the Company and the Operating Partnership will not
issue Common Stock or securities of either the Company or the Operating
Partnership in any transaction other than a publicly underwritten, widely
distributed offering of Company Common Stock or the acquisition by the Operating
Partnership of interests in real estate in consideration for Operating
Partnership Units, except for the exercise of outstanding Warrants or stock
options, or the conversion of outstanding Operating Partnership Units.
Section 5.6 "Information and Access." From the date hereof to the date on
which there shall remain outstanding no Company Preferred Stock, the Company and
its Subsidiaries shall afford to Buyer and Buyer's accountants, counsel and
other representatives full and reasonable access during normal business hours
(and at such other times as the parties may mutually agree) to its properties,
books, contracts, commitments, records and personnel and, during such period,
shall furnish promptly to Buyer (1) a copy of each report, schedule and other
document filed or received by it pursuant to the requirements of the Securities
Laws, and (2) all other information concerning their businesses, personnel and
the Company Properties as Buyer may reasonably request. Buyer and its
accountants, counsel and other representatives shall, in the exercise of the
rights described in this Section, not unduly interfere with the operation of the
businesses of the Company or its Subsidiaries.
Section 5.7 "Notification of Certain Matters." Until all of the Company
Preferred Stock has been issued or if all of the Company Preferred stock has not
been issued until March 19, 1999, each of Buyer and the Company shall use its
good faith efforts to notify the other party in writing of its discovery of any
matter that would render any of such party's or the other party's
representations and warranties contained herein untrue or incorrect in any
material respect, but the failure of either party to so notify the other party
shall not be deemed a breach of this Agreement.
ARTICLE 6
Certain Additional Covenants
Section 6.1 "Resale." Buyer acknowledges and agrees that the Company
Preferred Stock that Buyer will acquire in any Stock Purchase will not, as of
the relevant Closing thereof, be registered under the Securities Act or the
securities laws of any state and that it may be sold or otherwise disposed of
only in one or more transactions registered under the Securities Act and, where
applicable, such state securities laws or as to which an exemption from the
registration requirements of the Securities Act and, where applicable, such
state securities laws is available.
Section 6.2 "Use of Funds." The Company shall use the funds received from
Stock Purchases for the repayment of debt (of either the Company or the
Operating Partnership) or for the acquisition, rehabilitation, development or
refinancing by the Company or the Subsidiaries of properties, and for the
payment to Triton Pacific, L.L.C., referred to in the parenthetical in Section
4.5 hereof.
Section 6.3 "REIT Status." From and after the date hereof, the Company will
elect to be taxed as a REIT in its federal income tax returns, will comply with
all applicable laws, rules and regulations of the Code relating to a REIT, and
will not take any action or fail to take any action which would reasonably be
expected to,
26
alone or in conjunction with any other factors, result in the loss of its status
as a REIT for federal income tax purposes or the failure of the representations
in Section 3.8 hereof to be true and correct.
Section 6.4 "Payments." The Company acknowledges and agrees to pay or
reimburse from time to time upon the direction of Buyer, at and after the
Execution Closing, reasonable third-party transaction costs to Buyer, up to an
aggregate amount equal to $300,000, incurred or paid by Buyer and the Advancing
Party in completing this transaction (as invoiced by reasonably detailed
statements or invoices of the nature attached as Schedule 6.4, with appropriate
insertions), as well as with respect to expenses of Buyer and the Advancing
Party incurred or paid in connection with any amendment or modification of, or
waiver of, the transaction documents. It is understood that Buyer will share the
results of its due diligence review, and that of its counsel, with ▇▇▇▇▇▇
Brothers, Inc., as representative of the several underwriters, so as to enable
▇▇▇▇▇▇ Brothers, Inc., to reduce any out-of-pocket expenses it might incur
associated with an anticipated subsequent public offering of Company Common
Stock.
The Company shall have paid Buyer's expense in an amount equal to $100,000
which shall have been funded into Buyer's bank account as contemplated by the
letter of intent dated as of August 22, 1997. The Company acknowledges and
agrees that, at the Execution Closing, the $100,000 so paid to Buyer shall be
credited towards transaction costs incurred by the Buyer and payable by the
Company. At the Execution Closing, the Company acknowledges and agrees to pay
the amount of $750,000 to Buyer, as a holdback allowance, which Buyer may, at
its option, deduct from the amount of Purchase Price which would otherwise be
payable at the Initial Closing.
Notwithstanding any termination of this Agreement by Buyer pursuant to
Section 9.1(b) or 9.1(d), the Company acknowledges and agrees to make the
payments as set forth above.
Section 6.5 "Preemptive Rights." (a) Buyer shall have the rights set forth in
this Section 6.5 as the holder of record and beneficially of shares of Company
Stock. The rights set forth herein are in favor of Buyer and its successors and
assigns, provided that any exercise procedures to be accomplished hereunder
shall be performed by Buyer or its nominee and no other person may accomplish
such procedures or seek to exercise the preemptive right set forth in this
Section 6.5. Absent an express assignment of the rights of Buyer under this
Section 6.5, no transfer by Buyer of shares of Company Preferred Stock or
Company Common Stock shall affect the rights of Buyer hereunder.
(b) Buyer shall have, at any time and from time to time, the preemptive right
to purchase, in the case of the proposed issuance by the Company of, or the
proposed granting by the Company of shares of, any class of Company Stock, or
any rights to subscribe for or to purchase, or any options for the purchase of,
Company Stock or any stock or securities convertible into or exchangeable for
Company Stock (including, without limitation, interests in the Operating
Partnership) (such rights or options being hereinafter referred to as "Options"
and such convertible or exchangeable stock or securities being hereinafter
referred to as "convertible securities"). Except upon the occurrence on or
before November 31, 1997, of an underwritten widely distributed offering of
Company Common Stock at a price per share to the public of not less than
$11.3125, with not more than $150,000,000 in gross offering proceeds, on each
occasion that the Company proposes to issue Company Stock, options, warrants or
convertible securities, or any of the foregoing, the Company shall give to Buyer
prior written notice (the "Company Notice") of its intention, by first class
mail, postage prepaid, addressed at its last address as shown by the records of
the Company describing the same, the price and the specific terms (or in the
context of an offering of Company Stock, convertible securities, warrants or
options to the public, a range of price and terms) upon which the Company
proposes to issue the same. Buyer shall have 15 Business Days from the date of
the receipt by Buyer of the Company Notice to deliver a notice (the "Rights
Exercise Notice") notifying the Company of Buyer's intention to purchase all or
a part of its pro rata share of shares or other securities represented by
Company Stock, convertible securities, warrants or options, or any of the
foregoing, in accordance herewith, for the price and upon the terms specified by
the Company Notice, such pro rata share to be 19.9% (or, in the event of the
widely distributed public offering on the schedule, at the price and in the
amount of gross offering proceeds noted above, such lesser percentage as Buyer
shall hold immediately after such offering assuming no purchase by Buyer in such
27
offering or hereunder in connection with such offering) reduced after completion
of the public offering of Company Common Stock by ▇▇▇▇▇▇ Bros., Inc. (or such
lesser percentage as may reflect the beneficial ownership of Buyer of such
shares or securities or Company Stock, options, warrants or convertible
securities, warrants or any of the foregoing, but assuming until March 19, 1999,
that Buyer has purchased as at the Execution Closing all 2,737,000 shares of
Company Preferred Stock the sale and purchase of which is the object of this
Agreement, and assuming thereafter that Buyer is the holder of each and every
outstanding share of Company Preferred Stock), and at a price or prices no less
favorable to Buyer than the price or prices at which such Company Stock,
convertible securities, options or warrants are proposed to be offered for sale
to others, less, in the event of any sale other than a public offering, the per
unit amount of any placement fees or commissions, and provided, however, that
the purchase of such Company Stock, convertible securities, warrants or options
shall be consummated prior to the later of (i) 30 days after the date of the
Rights Exercise Notice and (ii) the date that the Company consummates the
issuance of the Company Stock, convertible securities, warrants or options
described in the Company Notice. If, in connection with any proposed issue of
Company Stock, convertible securities, warrants or options, the Buyer fails to
exercise in full its preemptive right as set forth in this Section 6.5, then
subject to the next following sentence, the Company may sell the unsold Company
Stock, convertible securities, warrants or options at any time within 180 days
(60 days in the case of a public offering) thereafter at a price and upon terms
no more favorable to the purchasers thereof than specified in the Company
Notice; provided, that the Company shall not sell or grant, or permit conversion
under, any Company Stock, convertible securities, warrants or Options, or any of
the foregoing, after such 180-day period (or 60-day period in the case of a
public offering) without renewed compliance with this Section 6.5; provided,
further, that in the case of a widely distributed underwritten public offering
of Company Stock, convertible securities, warrants or options, if in the good
faith opinion of the Company and the underwriter, such renewed compliance by the
Company with the procedural requirements hereunder (i.e., timing of notices,
etc.) would otherwise materially impede the consummation of such public
offering, the parties agree to take such further action as may be reasonably
necessary to effectuate such offering while preserving Buyer's substantive
preemptive right hereunder.
(c) The provisions of this Section 6.5 shall not apply to any shares of any
class of the Company Stock or convertible securities, warrants, options, or any
of them, (i) issuable upon redemption of Operating Partnership Units, the
conversion of any Company Preferred Stock, or upon exercise of the Warrants;
(ii) issuable upon conversion of convertible securities or the exercise of
options or warrants, or both, if Buyer was offered the opportunity to purchase
such shares or securities, or convertible securities, warrants or options, or
both, pursuant to this Section 6.5, and declined the same, or as to which Buyer
was not given such opportunity by reason of the application of this Section 6.5;
(iii) issuable in connection with stock splits, stock dividends or
recapitalizations as to the effects of which adjustment will be made as provided
elsewhere herein, or in the Certificate of Designation pertaining to the Company
Preferred Stock; (iv) issuable to employees and prospective employees, directors
and prospective directors, pursuant to any plan or pattern of employee or
director equity participation set forth in Schedule 3.3(a); and (v) issuable
upon acquisition of assets by the Operating Partnership in consideration for the
issuance of Operating Partnership Units.
(d) Notwithstanding the foregoing, if and to the extent that Buyer is
prevented or prohibited from the exercise in full or in part of its preemptive
right to purchase any Company Stock, convertible securities, warrants or
options, due to restrictions on the ownership by Buyer (or any group of holders
with which such Buyer may be affiliated or may be deemed to be affiliated) of
any thereof, whether under applicable Delaware law, or the Amended Company
By-laws, or by reason of restrictions applicable for purposes of the Company's
continued qualification as a REIT for purposes of the Code (the "Exercise
Restriction"), such number of Company Stock, convertible securities, warrants or
options required to be purchased pursuant to such preemptive right shall
automatically be reduced to such amount as to not exceed the Exercise
Restriction, and Buyer from time to time thereafter may exercise such right up
to an aggregate number of Company Stock, convertible securities, warrants or
options as is equal to such reduction, subject always to the restrictions as
aforesaid.
(e) The rights of Buyer set forth in this Section 6.5 shall commence on the
date hereof and shall expire on the fifth anniversary of the date hereof, except
as to purchases as to which Buyer may make on a deferred basis under Section
6.5(d) which shall continue without time restriction.
28
Section 6.6 "Board of Directors". On or before October 31, 1997, Buyer or any
Affiliate of Buyer designated by Buyer and the Company will have consulted
concerning the election of an additional individual to serve on the Board of
Directors, the Board of Directors will have considered the views and advice of
Buyer or any Affiliate of Buyer designated by Buyer with respect to the
background and experience it is desirable that such an individual possess and as
to specific individuals to be considered for such a position, and an additional
director to the Board of Directors, subject to this Section 6.6, will have been
elected and will have agreed so to serve. The consent of Buyer or any Affiliate
of Buyer designated by Buyer as to any such election or appointment will not be
sought or required. However, except as provided in the Certificate of
Designation, in no event will any individual who is an employee or independent
contractor of, or employee, independent contractor, consultant or member of a
firm which on an ongoing basis is rendering professional services to, the
Company, The Berkshire Group, or any Affiliate of The Berkshire Group, or of the
Company, be considered by the Company or elected or appointed as such an
additional director or to fill any vacancy on the Board of Directors which might
otherwise occur.
Section 6.7 "Transactions with Affiliates." Except as to matters as set forth
in Schedule 3.9(f) as in effect on the date hereof (but not including any
renewal, extension, amendment, alteration or other continuation of the same
except a renewal of any thereof year by year on the same terms), Buyer shall
have the right, and the Company, the Operating Partnership and the Subsidiaries
shall be bound by such right, to approve or disapprove in its sole and absolute
discretion any proposed transaction involving Affiliates of the Company,
including but not limited to The Berkshire Group, and Affiliates of The
Berkshire Group, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
and any Affiliate of a predecessor organization of The Berkshire Group, or any
of such Persons, but excluding from the prohibition in this Section 6.7
transactions involving Partnership Affiliates. Without having previously secured
in writing such approval of Buyer as to any such transaction, the Company, the
Operating Partnership and the Subsidiaries, or any of such Persons, will not
incur any obligation or liability as to any such transaction, nor make any
announcement thereto.
Section 6.8 "Company Stock Authorized, Issued and Outstanding." As of the
date seven days after the Initial Closing, Company shall inform Buyer of the
number of shares of Company Stock authorized, issued and outstanding, as of the
date thereof.
ARTICLE 7
Conditions to Closings
Section 7.1 "Conditions of Purchase at Initial Closing." The obligations of
Buyer to purchase and pay for the Purchased Shares at the Initial Closing are
subject to satisfaction or waiver of each of the following conditions precedent:
(a) "Representations and Warranties; Covenants." The representations and
warranties of the Company contained herein shall have been true and correct in
all respects on and as of the date hereof, and shall be true and correct in all
respects on and as of the date of the Initial Closing with the same effect as
though such representations and warranties had been made on and as of the date
of the Initial Closing (except for representations and warranties that speak as
of a specific date or time other than the date of the Initial Closing (which
need only be true and correct in all respects as of such date or time)). The
covenants and agreements of the Company to be performed on or before the date of
the Initial Closing in accordance with this Agreement shall have been duly
performed in all respects (except for the Company's obligation to deliver the
relevant shares of Company Preferred Stock at the Initial Closing). The Company
shall have delivered to Buyer at the Initial Closing a certificate of an
appropriate officer in form and substance reasonably satisfactory to Buyer dated
the date of the Initial Closing to such effect.
(b) "Company Preferred Stock; Certificate of Designation." The Certificate of
Designation shall have been duly filed with the office of the Secretary of State
of Delaware, any other Government Authority or NYSE and shall be in full force
and effect.
29
(c) "Company By-laws; Modification of Ownership Limit; Rights of Holder of
Company Preferred Stock; Modification of Partnership Agreement." The amendment
to the Company By-laws in the form attached as Exhibit C (subject to
modification satisfactory to both the Company and Buyer prior to the Initial
Closing) (the "Amended Company By-laws") shall have been approved by the Board
of Directors, all as required or permitted by and in accordance with the Company
Charter, duly filed if any filing thereof shall be required by any Government
Authority or NYSE, and shall be in full force and effect. The Board of Directors
resolutions pertaining to this Agreement, and the procedures, findings and
transactions contemplated hereby, shall have been presented at a meeting at
which a quorum of the Board of Directors was present and acting throughout,
shall have been duly approved and adopted by the Board of Directors, the
Secretary shall have been instructed to place the record of such action of the
Board of Directors in the records of the meetings of the Board of Directors, and
the Secretary shall have placed the record of such action in such records and
shall be in form and substance satisfactory to Buyer. The Partnership Agreement
shall have been modified, if necessary, (i) so as to create a primary
distribution to the Company in order to assure that the Company will receive, on
a priority basis, before the Operating Partnership makes other distributions,
amounts sufficient to pay all amounts due from time to time upon the Company
Preferred Stock, and (ii) in all other respects necessary to permit ERISA
counsel to the Buyer to confirm to the Buyer that its investment in the Company
Preferred Stock is in compliance with the rules and regulations promulgated
under and the provisions of ERISA.
(d) "HSR Act." Any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act shall have expired or been
terminated, and no action shall have been instituted by the United States
Department of Justice or the United States Federal Trade Commission challenging
or seeking to enjoin the consummation of the transactions contemplated hereby,
which action shall not have been withdrawn or terminated, or the Company and
Buyer shall have mutually concluded that no filing under the HSR Act is required
with respect to the transactions contemplated hereby and counsel to the Company
shall have rendered to both its opinion to such effect.
(e) "Consents." The Company shall have obtained the consents set forth in
Schedule 3.4(f).
(f) "Accountants." The Company shall have caused to be supplied to Buyer a
letter, satisfactory to Buyer in scope, form and substance, as to financial
statement matters referenced in Section 3.5(a) of this Agreement.
(g) "Disclosure Schedules." All schedules to this Agreement shall have been
amended or modified, if necessary, to reflect completion of Buyer's review
thereof and shall otherwise be satisfactory in scope and content to the Buyer in
all respects.
(h) "Registration Rights Agreement." The parties shall have executed and
delivered the Registration Rights Agreement.
Section 7.2 "Conditions of Purchase at All Closings." The obligations of
Buyer to purchase and pay for the Purchased Shares at each Closing (including
the Initial Closing) are subject to satisfaction or waiver of each of the
following conditions precedent:
(a) "Representations and Warranties; Covenants." The representations and
warranties of the Company contained herein shall have been true and correct in
all respects on and as of the date hereof, and shall be true and correct in all
respects on and as of the relevant Closing Date with the same effect as though
such representations and warranties had been made on and as of the Closing Date
(except for representations and warranties that speak as of a specific date or
time other than such Closing Date (which need only be true and correct in all
respects as of such date or time)). The covenants and agreements of the Company
to be performed on or before the relevant Closing Date in accordance with this
Agreement shall have been duly performed in all respects except for the
Company's obligation to deliver the relevant shares of Company Preferred Stock
at the relevant Closing. The terms and conditions of the Certificate of
Designation shall have been observed in all respects by the Company on and as of
the relevant Closing Date. As to each Closing other than the Initial Closing, no
condition to the obligations
30
of Buyer to purchase and pay for the Purchased Shares at the Initial Closing,
and that was not duly waived by Buyer, shall have failed to be satisfied as of
the Initial Closing. The Company shall have delivered to Buyer at the relevant
Closing a certificate of an appropriate officer in form and substance reasonably
satisfactory to Buyer dated the relevant Closing Date to such effect.
(b) "No Injunction." There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby and there shall
be no pending Actions which would reasonably be expected to have a material
adverse effect on the ability of the Company to consummate the transactions
contemplated hereby or to issue the Purchased Shares.
(c) "Proceedings." All corporate and other proceedings to be taken by the
Company in connection with the transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Buyer and Buyer shall have received all such counterpart originals
or certified or other copies of such documents as they may reasonably request.
(d) "REIT Status." The Company shall have elected to be taxed as a REIT in
its most recent federal income tax return, and shall be in compliance with all
applicable laws, rules and regulations, including the Code, necessary to permit
it to be taxed as a REIT. The Company shall not have taken any action or have
failed to take any action which would reasonably be expected to, alone or in
conjunction with any other factors, result in the loss of its status as a REIT
for federal income tax purposes.
(e) "Opinion of Counsel." Buyer shall have received an opinion from Peabody &
▇▇▇▇▇, counsel to the Company, in form and substance reasonably satisfactory to
Buyer.
(f) "Certain Conditions Still True." The conditions precedent set forth in
Section 7.1 shall continue to be satisfied or waived in all respects on and as
of each relevant Closing Date.
Section 7.3 "Conditions of Sale." The obligation of the Company to issue and
sell any Purchased Shares at any Closing (including the Initial Closing) is
subject to satisfaction or waiver of each of the following conditions precedent:
(a) "Representations and Warranties, Covenants." The representations and
warranties of Buyer contained herein shall have been true and correct in all
respects on and as of the date hereof, and shall be true and correct in all
respects on and as of the relevant Closing Date with the same effect as though
such representations and warranties had been made on and as of the Closing Date
(except for representations and warranties that speak as of a specific date or
time other than such Closing Date (which need only be true and correct in all
respects as of such date or time)). The covenants and agreements of Buyer to be
performed on or before the relevant Closing Date in accordance with this
Agreement shall have been duly performed in all respects (except for Buyer's
obligation to pay the relevant Purchase Price at the relevant Closing). Buyer
shall have delivered to the Company at the relevant Closing a certificate of an
appropriate officer in form and substance reasonably satisfactory to the Company
dated the relevant Closing Date to such effect.
(b) "HSR Act." Any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act shall have expired or been
terminated, and no action shall have been instituted by the United States
Department of Justice or the United States Federal Trade Commission challenging
or seeking to enjoin the consummation of the transactions contemplated hereby,
which action shall not have been withdrawn or terminated, or the Company and
Buyer shall have mutually concluded that no filing under the HSR Act is required
with respect to the transactions contemplated hereby.
(c) "No Injunction." There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby and there shall
be no pending Actions which would reasonably be expected to have a material
adverse effect on the ability of Buyer to consummate the transactions
contemplated hereby or to acquire the Purchased Shares.
31
(d) "Consents." The Company shall have obtained the consents set forth in
Schedule 3.4(d).
(e) "Proceedings." All corporate and other proceedings to be taken by Buyer
in connection with the transactions contemplated hereby and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Company and the Company shall have received all such counterpart originals or
certified or other copies of such documents as they may reasonably request.
(f) "Opinion of Counsel." The Company shall have received an opinion from
Buyer Counsel in form and substance reasonably satisfactory to the Company.
ARTICLE 8
Survival; Indemnification
Section 8.1 "Survival." All representations, warranties and (except as
provided by the last sentence of this Section 8.1) covenants and agreements of
the parties contained herein, including indemnity or indemnification agreements
contained herein, or in any Schedule or Exhibit hereto, or any certificate,
document or other instrument delivered in connection herewith shall survive the
Initial Closing until the third anniversary of the final Subsequent Purchase. No
Action or proceeding may be brought with respect to any of the representations
and warranties, or any of the covenants or agreements which survive until the
third anniversary of the final Subsequent Purchase, unless written notice
thereof, setting forth in reasonable detail the claimed misrepresentation or
breach of warranty or breach of covenant or agreement, shall have been delivered
to the party alleged to have breached such representation or warranty or such
covenant or agreement prior to the first anniversary of the Initial Closing.
Those covenants or agreements that contemplate or may involve actions to be
taken or obligations in effect after the Initial Closing shall survive in
accordance with their terms, and the indemnification described in Section 6.4
shall survive until the running of the applicable statutes of limitations.
Section 8.2 "Indemnification by Buyer or the Company." (a) Subject to Section
8.1, from and after any Closing Date, Buyer shall indemnify and hold harmless
the Company, its successors and assigns, from and against any and all damages,
claims, losses, expenses, costs, obligations, and liabilities, including
liabilities for all reasonable attorneys' fees and expenses (including attorney
and expert fees and expenses incurred to enforce the terms of this Agreement)
and Liabilities (collectively, "Loss and Expenses") suffered, directly or
indirectly, by the Company by reason of, or arising out of, (i) any breach as of
the date made or deemed made or required to be true of any representation or
warranty made by Buyer in or pursuant to this Agreement, or (ii) any failure by
Buyer to perform or fulfill any of its covenants or agreements set forth herein.
Notwithstanding any other provision of this Agreement to the contrary, in no
event shall Loss and Expenses include a party's incidental or consequential
damages.
(b) Subject to Section 8.1, from and after any Closing Date, the Company
shall indemnify and hold harmless Buyer, its successors and assigns, from and
against any and all Loss and Expenses, suffered, directly or indirectly, by
Buyer by reason of, or arising out of, (i) any breach as of the date made or
deemed made or required to be true of any representation or warranty made by the
Company in or pursuant to this Agreement and any statements made in any
certificate delivered pursuant to this Agreement, or (ii) any failure by the
Company to perform or fulfill any of its covenants or agreements set forth
herein. Notwithstanding any other provision of this Agreement to the contrary,
in no event shall Loss and Expenses include a party's incidental or
consequential damages.
Loss and Expenses of Buyer as to which Buyer shall be indemnified by the
Company in accordance with this Section 8.2(b) shall include amounts measured as
provided in the next two following sentences. Any breach or inaccuracy of any
sort referred to in clause (i) of the first sentence of this Section 8.2(b) (any
such, an "Inaccuracy") shall create Loss and Expenses of Buyer in an amount
equal to the product of the Buyer Portion (as defined below) multiplied by the
amount or amounts of (i) any Loss or Expenses of the Company or any Subsidiary
32
and (ii) any failure to receive, loss of or reduction in revenue of the Company
or any Subsidiary, in either case misstated in or omitted from the Agreement or
any certificate in an Inaccuracy. In all cases, Loss and Expenses of Buyer shall
be adjusted upwards to reflect payment, when made by the Company to Buyer, of
indemnity pursuant to this Section 8.2(b), such that Buyer receives indemnity
from the Company with respect to the Liability represented by any payment to
Buyer pursuant to this Section 8.2(b).
As used in this Section 8.2(b), "Buyer Portion" shall mean a fraction (i) the
numerator of which is the sum of (A) the number of shares of Company Common
Stock held by Buyer plus (B) the number of shares of Company Common Stock which
Buyer would at any time be entitled to receive on conversion of Company
Preferred Stock purchased by Buyer (at the then applicable Conversion Price, and
otherwise as set forth in and established pursuant to Article FIRST, Section 5
of the Certificate of Designation, and assuming until March 19, 1999, that Buyer
has purchased at the Execution Closing all 2,737,000 shares of Company Preferred
Stock the sale and purchase of which is the object of this Agreement, and
assuming thereafter that Buyer is the holder of each and every outstanding share
of Company Preferred Stock), and (ii) the denominator of which is a number equal
to (A) the number of all shares of Company Common Stock then outstanding or
which would be outstanding after giving effect to rights to receive shares of
Company Common Stock pursuant to the exercise of conversion privileges under
then outstanding, fully paid and non-assessable securities of the Company,
including the Company Preferred Stock, minus (B) the number of shares
established in clause (i) as the numerator of the fraction.
(c) Notwithstanding the foregoing, (i) neither Buyer nor the Company shall be
responsible for any Loss and Expenses as provided by paragraphs (a) and (b),
respectively, of this Section 8.2, until the cumulative aggregate amount of such
Loss and Expenses suffered by Buyer or the Company, as the case may be, exceeds
$400,000, in which case Buyer or the Company, as the case may be, shall then be
liable for such Loss and Expenses exceeding such amount, and (ii) the cumulative
aggregate indemnity obligation of each of Buyer and the Company under this
Section 8.2 shall in no event exceed the Total Equity Commitment. Except with
respect to third-party claims being defended in good faith or claims for
indemnification with respect to which there exists a good faith dispute, the
indemnifying party shall satisfy its obligations hereunder within 30 days of
receipt of a notice of claim under this Article 8.
Section 8.3 "Third-Party Claims." If a claim by a third party is made against
an Indemnified Party and if such Indemnified Party intends to seek indemnity
with respect thereto under this Article, such Indemnified Party shall promptly
notify the indemnifying party in writing of such claims setting forth such
claims in reasonable detail. The indemnifying party shall have 20 days after
receipt of such notice to undertake, through counsel of its own choosing and at
its own expense, the settlement or defense thereof, and the Indemnified Party
shall cooperate with it in connection therewith, provided, however, that the
Indemnified Party may participate in such settlement or defense through counsel
chosen by such Indemnified Party, provided that the fees and expenses of such
counsel shall be borne by such Indemnified Party. The Indemnified Party shall
not pay or settle any claim which the indemnifying party is contesting.
Notwithstanding the foregoing, the Indemnified Party shall have the right to pay
or settle any such claim, provided that in such event it shall waive any right
to indemnity therefor by the indemnifying party. If the indemnifying party does
not notify the Indemnified Party within 20 days after the receipt of the
Indemnified Party's notice of a claim of indemnity hereunder that it elects to
undertake the defense thereof, the Indemnified Party shall have the right to
contest, settle or compromise the claim but shall not thereby waive any right to
indemnity therefor pursuant to this Agreement.
ARTICLE 9
Termination
Section 9.1 "Termination." This Agreement may be terminated at any time prior
to the Initial Closing by:
(a) the mutual consent of the Company and Buyer;
33
(b) Buyer (if it is not in breach of any of its material obligations
hereunder) in the event of a breach or failure by the Company that is material
in the context of the transactions contemplated hereby of any representation,
warranty, covenant or agreement by the Company contained herein which has not
been, or cannot be, cured within 30 Business Days after written notice of such
breach is given to the Company;
(c) the Company (if it is not in breach of any of its material obligations
hereunder) in the event of a breach or failure by Buyer that is material in the
context of the transactions contemplated hereby of any representation, warranty,
covenant or agreement by Buyer contained herein which has not been, or cannot
be, cured within 30 Business Days after written notice of such breach is given
to Buyer; or
(d) Buyer if the Initial Closing shall not have occurred on or prior to
December 19, 1997, unless the failure of such occurrence shall be due to the
failure of Buyer to perform or observe any material covenant or agreement set
forth herein required to be performed or observed by Buyer on or before the date
of the Initial Closing.
Section 9.2 "Procedure and Effect of Termination." In the event of
termination of this Agreement by either or both of the Company and Buyer
pursuant to Section 9.1, written notice thereof shall forthwith be given by the
terminating party to the other party hereto, and this Agreement shall thereupon
terminate and become void and have no effect, and the transactions contemplated
hereby shall be abandoned without further action by the parties hereto, except
that the provisions of Sections 5.4 (Public Announcements), 6.4 (Payments), 9.3
(Expenses), 10.2 (Governing Law), and 10.4 (Notices) shall survive the
termination of this Agreement; provided, however, that such termination shall
not relieve any party hereto of any liability for any breach of this Agreement.
Section 9.3 "Expenses." Except as set forth in this Agreement, whether or not
any Stock Purchase is consummated, all legal and other costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and expenses.
ARTICLE 10
Miscellaneous
Section 10.1 "Counterparts." This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each
party hereto and delivered to the other party. Copies of executed counterparts
transmitted by telecopy, telefax or other electronic transmission service shall
be considered original executed counterparts for purposes of this Section,
provided receipt of copies of such counterparts is confirmed.
Section 10.2 "Governing Law." THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO THE CHOICE OF LAW PRINCIPLES THEREOF.
Section 10.3 "Entire Agreement." This Agreement (including agreements
incorporated herein) and the Schedules and Exhibits hereto contain the entire
agreement between the parties with respect to the subject matter hereof and
there are no agreements, understandings, representations or warranties between
the parties other than those set forth or referred to herein. This Agreement is
not intended to confer upon any person not a party hereto (and their successors
and assigns) any rights or remedies hereunder.
Section 10.4 "Notices." All notices and other communications hereunder shall
be sufficiently given for all purposes hereunder if in writing and delivered
personally, sent by documented overnight delivery service or, to the extent
receipt is confirmed, telecopy, telefax or other electronic transmission service
to the appropriate address or number as set forth below. Notices to the Company
shall be addressed to:
34
Berkshire Realty Company, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopy Number: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Berkshire Realty Company, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telecopy Number: ▇▇▇-▇▇▇-▇▇▇▇
and a copy to:
Peabody & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Telecopy Number: ▇▇▇-▇▇▇-▇▇▇▇
or at such other address and to the attention of such other person as the
Company may designate by written notice to Buyer. Notices to Buyer shall be
addressed to:
▇▇▇▇▇▇▇▇▇ Partners, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Telecopy Number: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ Partners, L.L.C.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇
Telecopy Number: ▇▇▇-▇▇▇-▇▇▇▇
and a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇
Telecopy Number: ▇▇▇-▇▇▇-▇▇▇▇
Section 10.5 "Successors and Assigns." This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors. Except as specifically provided hereby, Buyer shall not be permitted
to assign any of its rights hereunder to any third party, other than to one or
more Affiliates of Buyer or the Advancing Party of which Buyer and the Advancing
Party collectively, directly or indirectly, own a majority of the voting power,
provided that such Affiliates agree to be bound hereby, and provided that any
bona fide
35
financial institution to which any Buyer, or any permitted transferee has
transferred (including upon foreclosure of a pledge) shares of Company Stock for
the purpose of securing bona fide indebtedness of any Buyer and which has agreed
to be bound by this Agreement shall also be entitled to enforce the rights of
Buyer hereunder.
Section 10.6 "Headings." The Section, Article and other headings contained in
this Agreement are inserted for convenience of reference only and will not
affect the meaning or interpretation of this Agreement. All references to
Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated.
Section 10.7 "Amendments and Waivers." This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought. Either
party hereto may, only by an instrument in writing, waive compliance by the
other party hereto with any term or provision hereof on the part of such other
party hereto to be performed or complied with. The waiver by any party hereto of
a breach of any term or provision hereof shall not be construed as a waiver of
any subsequent breach.
Section 10.8 "Interpretation; Absence of Presumption." (a) For the purposes
hereof, (i) words in the singular shall be held to include the plural and vice
versa and words of one gender shall be held to include the other gender as the
context requires, (ii) the terms "hereof," "herein," and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole (including all of the Schedules and Exhibits hereto) and
not to any particular provision of this Agreement, and Article, Section,
paragraph, Exhibit and Schedule references are to the Articles, Sections,
paragraphs, Exhibits and Schedules to this Agreement unless otherwise specified,
(iii) the word "including" and words of similar import when used in this
Agreement shall mean "including, without limitation," unless the context
otherwise requires or unless otherwise specified, (iv) the word "or" shall not
be exclusive, and (v) provisions shall apply, when appropriate, to successive
events and transactions.
(b) This Agreement shall be construed without regard to any presumption or
rule requiring construction or interpretation against the party drafting or
causing any instrument to be drafted.
Section 10.9 "Severability." Any provision hereof which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.
The obligations and liabilities of Buyer and the Advancing Party under or in
connection with this Agreement are several.
Section 10.10 "Further Assurances." The Company and Buyer agree that, from
time to time, whether before, at or after any Closing Date, each of them will
execute and deliver such further instruments of conveyance and transfer and take
such other action as may be necessary to carry out the purposes and intents
hereof.
Section 10.11 "Specific Performance." Buyer and the Company each acknowledge
that, in view of the uniqueness of the parties hereto, the parties hereto would
not have an adequate remedy at law for money damages in the event that this
Agreement were not performed in accordance with its terms, and therefore agree
that the parties hereto shall be entitled to specific enforcement of the terms
hereof in addition to any other remedy to which the parties hereto may be
entitled at law or in equity.
Section 10.12 "Schedules." Any matter set forth on any Schedule shall be
deemed to be referred to on all other Schedules to which such matter logically
relates and where such reference would be appropriate and can reasonably be
inferred from the matters disclosed on the first Schedule as if set forth on
such other Schedules.
36
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of
the parties hereto as of the day first above written.
BERKSHIRE REALTY COMPANY, INC.
By: _______________________________________
President
▇▇▇▇▇▇▇▇▇ BERKSHIRE HOLDINGS, L.L.C.
By: _______________________________________
Managing Member
Initial Closing Number of Shares of Company
Preferred Stock: 2,737,000
________________ Berkshire Realty Company, Inc.
(initials)
________________ ▇▇▇▇▇▇▇▇▇ Berkshire Holdings, L.L.C.
(initials)
37
Advancing Party
▇▇▇▇▇▇▇▇▇ Real Estate Fund II, L.P. hereby joins in the foregoing Agreement
for purposes of Section 2.8 thereof.
▇▇▇▇▇▇▇▇▇ REAL ESTATE FUND II, L.P.
General Partner
By: ▇▇▇▇▇▇▇▇▇ Real Estate Partners Management II, L.L.C.,
General Partner
By: ▇▇▇▇▇▇▇▇▇ Real Estate Partners, L.L.C., Managing
Member
By: ______________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Managing Member
38